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FOREX-Yen firms, Australian dollar slips after RBA stands pat

Published 05/07/2016, 03:25 pm
Updated 05/07/2016, 03:30 pm
© Reuters.  FOREX-Yen firms, Australian dollar slips after RBA stands pat
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* RBA holds rates steady and refrains from guidance

* Yen gains as China services survey dents risk sentiment

* Sterling skids, but holds above last week's 31-year lows

By Lisa Twaronite

TOKYO, July 5 (Reuters) - The Australian dollar slipped on Tuesday as the central bank held steady and analysts speculated that easing could lie ahead, while the perceived safe-haven yen got a lift from worrying signs in China's service sector.

Trading was subdued with no directional clues from U.S. markets, which were shut on Monday for the Independence Day holiday.

A private survey showed that activity in China's services sector rose to an 11-month high in June, but a composite measure of activity fell to a four-month low. That raised fears the services sector may not be able to make up for a prolonged decline in the industrial economy that has pushed China's growth to 25-year lows. are no domestic factors that could explain the yen's strength, so it appears to be the 'risk-off' effect from China that's bringing the dollar/yen to test the 102 level," said Ayako Sera, market economist at Sumitomo Mitsui Trust Bank in Tokyo.

The dollar was down 0.5 percent at 102.03 yen JPY= after briefly dipping as low as 101.985, while the euro fell 0.8 percent to 113.51 yen EURJPY=R .

The Aussie initially pulled away from session lows when the Reserve Bank of Australia kept policy steady, but then it slipped 0.3 percent to $0.7507 AUD=D4 , moving away from Monday's more than one-week high of $0.7545.

Australia's central bank kept its cash rate steady at 1.75 percent, a widely expected decision given political uncertainty at home and abroad and a lack of up to date information on domestic inflation.

"The next natural signpost is the inflation data at the end of this month, so markets are anchored around a rate cut in August, and we think that won't be the last one either," said Ben Jarman, economist at JP Morgan.

Possible policy paralysis after no clear winner emerged from a weekend election continued to threaten the Aussie's outlook, in addition to the potential Brexit fallout. is not a direct threat to Australia, but over time the hit to investment and risk-taking sentiment may weigh on commodity prices, adding to the pressure on the RBA," Marshall Gittler, head of investment research at FXPrimus, said in a note.

Brexit has ramped up the urgency for some Asian central banks to ease monetary policy, as a prolonged period of uncertainty threatens a wider downshift in trade and investment. timing of Britain's actual exit from the EU remains unclear, and against this backdrop, investors have begun to hope for additional stimulus and UK corporate tax cuts to blunt the impact of the move. shed 0.3 percent to $1.3247 GBP=D4 , but remained above last week's 31-year trough of $1.3122 plumbed in the wake of the Brexit vote.

The U.S. dollar index, which tracks the greenback against a basket of six rival currencies, was steady at 95.653 .DXY .

The euro inched down 0.2 percent to $1.1126 EUR= .

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