Australian dollar holds six-year low after RBA minutes, headed to $0.70

The Australian dollar held near the six-year low it hit last week as the minutes of the most recent RBA policy review showed that members expect further easing in interest rates.

The AUD/USD slipped to 0.7610 from Monday's (16 March) close of 0.7641 before edging back up to 0.7635 by 04:30 GMT. The pair had touched a low of 0.7560 on 11 March, its lowest since May 2009.

The RBA had left the cash rate target, the policy interest rate, at 2.25% at its 3 March review. In the previous review, the rate was slashed by 25 basis points unexpectedly, setting the stage for the new multi-year low in the Aussie dollar.

The minutes of this month's meeting said: "On the basis of the current forecasts for growth and inflation, members were of the view that a case to ease monetary policy further might emerge."

The policymakers, however, wanted more data before another reduction and believed the February cut can further boost growth, the minutes showed.

The sharp rally in the US dollar with the euro trading at a 12-year low has also been a factor weakening the Aussie currency. The decline in the euro has pushed the USD index to a 12-year high above 100.

Data from China on 17 March showed that foreign direct investment in the world's second largest economy has risen 17% in February, slower than the January growth of 24%, but taking the amount to a new record.

Higher investment in China would mean more demand for raw materials, an Aussie-positive scenario with Australia getting bulk of its export revenues from commodities shipments to China.

The Australian currency has fallen 7.4% so far this year and the next support visible is the 0.7386-0.7241 region. A break of that will take the currency down to 0.7012 ahead of 0.6773 and then 0.6004.

However, the 0.7000 region seems a strong support zone as it meets a long-term uptrend that dates back to May 2001.

On the higher side, 0.8066 is the nearest main resistance level after which 0.8500 and then the more important 0.8659 will emerge as tougher barriers.