Euro surges above $1.16 for first time since August; dollar dives against yen

The euro broke Tuesday above $1.16 on more bets that U.S. interest rates won’t go up this year, while the Australian dollar dived after that nation’s central bank cut interest rates.

The Japanese yen also renewed its advance against the dollar.

The euro EURUSD, +0.5288% last changed hands at $1.1590, rising 0.6% from late Monday. But it briefly rose as high as $1.1618, according to FactSet data.

The shared currency is trading at levels last seen in August, building on the prior day’s gain. On Monday, the euro broke above $1.15 as the view that the Federal Reserve could stand pat on interest rates for the rest of 2016 was seen gaining traction.

Meanwhile, the Australian dollar AUDUSD, -1.1737% fell 0.7% to 76.09 U.S. cents.

The Aussie currency took a hit after the Reserve Bank of Australia cut interest rates for the first time in a year, in a bid to combat record-low inflation and a strong local currency. The cash rate target was cut by one-quarter of a percentage point to a new low of 1.75%. Analysts had been split on whether the central bank would cut.

“The move by the RBA wasn’t exactly unexpected following last week’s inflation release but at the same time, it was not a guarantee either, with the Australian economy showing signs of improvement as highlighted repeatedly by the central bank itself,” said Craig Erlam, senior market analyst at Oanda, in a note.

In other trade, the U.S. dollar USDJPY, -0.56% dropped 0.7% to ¥105.72, and the ICE U.S. Dollar Index DXY, -0.50% shed 0.7% to 92.00.

Source: MarketWatch