Antipodean Currencies Struggle as China Cuts Key Interest Rates

The Australian and New Zealand dollars declined following China's decision to cut key interest rates, signaling an intent to boost growth. The yen rose ahead of the BOJ's policy meeting, while the dollar index dipped slightly. Market reactions to U.S. political developments were muted.

The Australian and New Zealand dollars faced difficulties in recovering on Tuesday after China announced cuts to several key interest rates. This move by China was its first comprehensive rate cut since August, aiming to stimulate growth in the world's second-largest economy.

Both Antipodean currencies, often used as liquid proxies for the Chinese yuan, extended their losses after an initial drop in the previous session. The Australian dollar hit a three-week low at $0.6629, while the New Zealand dollar reached its weakest level since early May at $0.5966.

According to Rodrigo Catril, Senior FX Strategist at National Australia Bank, the rate cuts from China's central bank signal a willingness to support the economy, which might lead to a tolerance for a slightly weaker Chinese yuan.

The broader market saw subdued currency movements as traders awaited central bank meetings in the U.S. and Japan next week. The yen found support due to recent interventions by Tokyo to stabilize the currency and anticipation of the Bank of Japan's policy details expected next month.

Against the yen, the dollar fell 0.45% to 156.32, while the euro eased 0.02% to $1.0889, and sterling remained flat at $1.29305. The dollar index also dipped slightly to 104.26. Market reaction to U.S. President Joe Biden's decision to withdraw from the election race was muted, despite some unwinding of Trump-related trades.

In the cryptocurrency space, bitcoin dropped 2% to $66,767, retreating from a one-month high.

(With inputs from agencies.)