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Daily Review 07.09.2016

Reserve Bank of Australia keeps official interest rate unchanged

The Reserve Bank of Australia (RBA) has left its cash rates at record low 1.5% over August in their final board meeting held yesterday.

The decision showed the continuous decline of cash rates over a decade from 6% to an underwhelming 1.5% that opened a chance of another rate cut this November.

Some factors that spurred the bank to keep the interest rates steady were continued growth, low inflation and mixed labour data.

In effect, the Australian dollar remained bullish for five consecutive trading days as it rose 0.8%, closing at 76.40 against the US dollar.

Meanwhile, Asian stocks ended mixed on Tuesday trading after the bank announced the decision. Australian stocks were thrown in the negative territory with ASX 200 slipping down 15.981 points, or 0.29% at 5 413.6.

Japan’s Nikkei advanced 44.35 points, or 0.26% at 17 081.98 while Korea’s Kospi added 6.45 points,or 0.31% at 2 066.53. The Hang Seng index of Hong Kong finished up 0.43%.

Across China, mainland markets were impressively higher as Shanghai composite climbed 19.353 points, or 0.63% at 3 091.448 and the Shenzen composite added 30.088 points, 0r 1.491% at 2 048.19.

Dollar touches largest daily drop on weak service sector index

US dollar registered its biggest daily fall in a month after a disappointing service sector index reached its weakest level on six years, adding more concerns to the health of the economy.

The Institute for Supply Management’s (ISM) service sector index recorded a 51.4% decline in august from 55.5%, the lowest level since early 2010.

The dollar index fell 1.1% against basket of major currencies and last closed at 85.75, its lowest finish since August 23.

Japanese yen came surging on Tuesday trading as it closed 102.09 against the greenback while the euro also strengthened to 1.1254 from 1.1149 on Monday session. The British pound was also up at 1.3439, its strongest level since mid-July.

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