AUD/USD Remains Under 0.73 Ahead of RBA

The Canadian dollar languished at 11-year lows on Tuesday as a continuing selloff in oil prices thrust the loonie and other commodity currencies such as the Australian dollar into the spotlight, stealing the focus from a subdued U.S. dollar that held steady against the euro and yen.  In a bearish turn of events for currencies of oil exporters, crude prices slid a further 5 percent overnight to their lowest since January after weak factory activity in China deepened a commodity-wide rout.

This was also bad news for the Aussie, often used as a proxy for China trades. However, better-than-expected June Australian retail sales, released on Tuesday, gave it a bit of a breather.  The Aussie last traded at $0.7296 AUD=D4, inching away from a six-year trough of $0.7234 set last week.  The Australian dollar’s near-term direction still hinged on the outcome of the Reserve Bank of Australia’s policy meeting at 0430 GMT (12:30 a.m. EDT).

While the RBA is considered almost certain to leave the cash rate unchanged at a record low 2.0 percent, it could try to talk down the currency.  The central bank has consistently said the exchange rate was still high, particularly as commodity prices such as iron ore have fallen even more, although RBA Governor Glenn Stevens recently declined to be drawn on whether the currency had fallen enough.