The U.S. dollar weakened after crude settled sharply lower Monday, as markets turned to the Reserve Bank of Australia’s (RBA) looming rate decision for a near-term signal on borrowing costs.
U.S. West Texas Intermediate finished Monday at $96.46 after losing $7.66, or 7.36%; Brent settled at $104.77, down $8.66, or 7.63%, Reuters reported. The dollar index had touched 101.42, its lowest level since Sept. 30, before closing 0.22% lower at 101.76, the outlet said.
Reuters said traders were assessing whether diplomacy over Iran might eventually ease oil-supply concerns. Iran’s Foreign Ministry said contacts with the United States were continuing through mediators. Reuters reported that Qatar-mediated talks had ended without a breakthrough. Sim Moh Siong, FX strategist at OCBC, said, “Oil relief is growing, but conviction elsewhere remains thin.”
The Australian dollar was little changed at $0.7002 in a Tuesday morning market snapshot, Reuters reported, as traders awaited the RBA decision. A Reuters poll found 30 of 32 economists expected a 25-basis-point increase to 4.85%. Finder’s separate survey found 30 of 40 experts expected the same move. The RBA’s cash rate target stood at 4.60% before the decision; the survey results were forecasts, not an announcement.
In its Sept. 29 statement, the RBA Board said oil-supply disruptions were adding to energy prices and noted that higher fuel costs had spread partly to other goods and services. The Board said it wanted demand growth to stay subdued while inflation returned to target. The RBA says its cash rate affects lending and deposit rates, economic activity, employment and inflation.
Richard Whitten, Finder’s home loans expert, said another increase would add pressure on households. The RBA scheduled its decision for 10:30 p.m. ET Monday, followed by a media conference at 11:30 p.m. ET.
