By Rae Wee
SINGAPORE, April 4 (Reuters) - The Australian dollar
slipped on Tuesday after the Reserve Bank of Australia (RBA)
held interest rates steady, while the U.S. dollar regained some
of the ground lost when data showed a slump in U.S.
manufacturing activity last month.
In a closely watched monetary policy decision, the RBA on
Tuesday left its cash rate unchanged at 3.60%, as expected, with
policymakers saying additional time was needed to "assess the
impact of the increase in interest rates to date and the
economic outlook".
The Aussie fell in volatile trade following the
decision and was last 0.32% lower at $0.6765.
In the broader market, the dollar was reclaiming some lost
ground during the Asian trading session after it tumbled on
Monday when data pointed to a further slowing of the U.S.
economy.
The Institute for Supply Management (ISM) survey showed on
Monday that manufacturing activity fell to the lowest in nearly
three years in March as new orders continued to contract, with
all subcomponents of its manufacturing PMI below the 50
threshold for the first time since 2009.
That sent the greenback broadly lower, tracking a slide in
U.S. Treasury yields, as investors pared expectations on how
much longer interest rates would need to remain in restrictive
territory.
The British pound and New Zealand dollar hit multi-week
highs in early Asia trade on Tuesday but subsequently pulled
back.
Sterling was last 0.05% lower at $1.2410, having
touched its highest since late January at $1.2425.
The kiwi rose 0.2% to $0.6310, its highest since
mid-February, and last stood at $0.6297.
Against a basket of currencies, the U.S. dollar index rose 0.17% to 102.20, reversing some of Monday's more than 0.5%
fall.
"The ISM manufacturing report for March was a dud," said
economists at Wells Fargo. "The closest thing we get to good
news in (the) report is that the slowing in the factory sector
is pushing prices lower and supply chains are continuing to
heal, benefiting from the slack.
"Beyond that, the rest of the themes were those that often
precede an economic recession."
The euro fell 0.11% to $1.0890, having gained more
than 0.5% on Monday. Against the Japanese yen , the
dollar rose 0.28% to 132.83.
Futures pricing shows that markets expect the Federal
Reserve to begin cutting rates as early as September through the
end of the year, with rates seen just above 4.3% by December. The two-year Treasury yield , which typically
moves in step with interest rate expectations, was last at
3.9780%, having fallen nearly 10 basis points on Monday. The sluggish U.S. economic data overshadowed renewed
inflation fears after the OPEC+ group jolted markets with plans
to cut more production, sending oil benchmarks jumping 6% on
Monday.
"Apart from the direct cost impact of the 6-7% jump in oil
prices, economic headwinds are also posed by the prospects of
stickier inflation prolonging the global tightening cycle (and)
intensifying policy trade-offs," said Vishnu Varathan, head of
economics and strategy at Mizuho Bank.
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(Reporting by Rae Wee; Editing by Sam Holmes and Edmund
Klamann)
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