Aussie slips after cautious assessment on local economy

On Tuesday, the Australian Dollar fell and hit $0.7781, the lowest in more than two months, after the Reserve Bank of Australia kept rates on hold at a record low of 1.5%, while noting that a stronger local currency would slow the economy and restrain price pressures. The Central Bank said that local economic growth was expected to pick up gradually in the coming years. However, it also noted that slow wage growth and high household debt are likely to constrain spending and growth.

Meanwhile, the US Dollar climbed to a 1-1/2-month high against its peers after the release of upbeat US manufacturing activity. The ISM index exceeded expectations and rose to 60.8 in September, from 58.8 in August. US construction spending also rebounded in August after two straight months of declines, boosted by increases in both private and public outlays. Moreover, the Yield on the benchmark 10-year note hit its highest since mid-July on Monday after the upbeat data reinforced expectations that the Federal Reserve will increase US interest rates in December for a third time this year.

On Monday, Oil fell more than $1 a barrel as a rise in US drilling and higher OPEC output put the brakes on a rally that helped prices notch their biggest third-quarter gain in 13 years. US drillers added six Oil rigs in the week to September 29, bringing the total count to 750, data from General Electric Co.’s Baker Hughes energy services firm showed last Friday. Furthermore, Iraq said on Monday that exports rose slightly in September 2017 from its southern oilfields, while an earlier Thomson Reuters survey indicated that the OPEC overall boosted output.