Rate cut reverses Australian stock moves
Australian stocks traded in a massive range Tuesday with the announcement mid-session of a 1-per-cent interest rate cut powering the market off morning lows, dpa reported.
Sellers swamped the market at the opening bell with the ASX 200 losing more than 3 per cent in the first minutes of trading.
But the afternoon statement from the Reserve Bank of Australia (RBA) of a bigger-than-expected cut in the rate it lends to banks reversed the direction and took stocks out of the red.
With an hour of trading to go, the AXS 200 had put on 92 points, or 1.9 per cent, to 4,724.
The sharp easing of the monetary policy further weakened the Australian dollar's performance on the cross rates. The local currency, which had given up 5 US cents in overnight trading to reach a two-year low of 72 US cents, dropped further to 71 US cents.
The Australian dollar has depreciated more than 20 per cent since near-parity in June as fears grow that a worldwide recession will cut demand for coal, iron ore and other big export earners.
"Commodities demand numbers of the US have been shocking recently and there are signs of slowing in China, so people are reassessing that," said National Australia Bank economist Jeff Oughton. "Both of those work against the Aussie dollar."