Investing.com – The Australian dollar fluctuated between small gains and losses on Tuesday morning ahead of the Reserve Bank of Australia’s rate review, amid expectations that it would keep interest rates on hold.
The RBA will make its first cash rate announcement for the year, due at 1430 Sydney time (0330 GMT). It is expected to leave the cash rate unchanged at the record low 2.5%, but at the same time there is growing expectation that it will remove its mild easing bias. Recent economic data indicated a pickup in consumer spending and business conditions and continued strengthening in the housing market.
Markets in China remain closed for the weeklong lunar New Year holidays, and are due to reopen Friday.
AUD/USD traded up 0.03% at 0.8752, USD/JPY rose 0.14% to 101.12, while NZD/USD fell 0.03% at 0.8081.
Meanwhile on Monday, the dollar dropped against most major currencies after a widely-watched gauge of U.S. factory activity disappointed investors and stoked expectations for the Federal Reserve to wind down stimulus programs on a very gradual basis.
The Institute for Supply Management said its manufacturing index fell to a seven-month low in January, as new orders slumped.
The ISM’s manufacturing purchasing managers’ index came in at 51.3 in January, down from 57.0 in December.
Analysts were expecting the index to inch down to 56.4 in January.
The report added new order growth fell at its fastest rate in 33 years, with the new orders index dropping to 51.2 from 64.4 in December. The employment index fell from 55.8 in December to 52.3, the weakest since June.
Also on Monday, U.K.-based Markit reported that its U.S. manufacturing PMI came in at a three-month low of 53.7 for January, missing expectations for a 53.8 reading.
The soft numbers reminded investors that the Federal Reserve will trim its USD65 billion monthly bond-buying program on a gradual basis, and won''t tighten policy in the foreseeable future.
Stimulus tools tend to weaken the dollar by suppressing interest rates to spur recovery.
The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.04% at 81.16.
On Tuesday, the U.S. is to produce data on factory orders, a leading indicator of production.