Forex - Aussie gains despite RBA rate cut to record low 2%

Investing.com - The Australian dollar gained on Tuesday after the central bank cut its cash rate 25 basis points to a record low 2%.

AUD/USD traded at 0.7887, up 0.64%, while USD/JPY changed hands at 120.13, flat, in holiday-thinned trade.

The RBA's cash rate decision cited moderate prices ahead as providing the chance to cut, but the market likely saw the move as an economic boost and took the currency higher even as Governor Glenn Stevens said it likely needed to fall further.

Japanese markets are closed today to mark Children's Day public holiday, a period commonly known as Golden Week. Markets are closed through Wednesday and re-open on Thursday.

In Australia, the AiGroup April services index fell 0.5 point to 49.7 in April, down from 50.2 in March.

Australia's March trade data came in at A$1.3 billion, wider than the A$1 billion seen and compared with a deficit of A$1.265 billion in February.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was up 0.12% to 95.70.

Overnight, the dollar remained broadly higher against a basket of other major currencies on Monday, after data showed that U.S. factory orders rose for the first time in eight months in March and as upbeat U.S. economic reports published on Friday continued to support.

In a report, the U.S. Census Bureau said factory orders jumped by a seasonally adjusted 2.1% in March, just above expectations for a gain of 2.0%.

Factory orders fell by 0.1% in February, whose figure was revised down from a previously reported gain of 0.2%.

The dollar also remained supported after the Institute for Supply Management reported on Friday that activity in the manufacturing sector was stable in April, after slowing in the five previous months.

Another report showed that U.S. consumer sentiment rose in April to its highest level since January.

The reports fuelled optimism that the U.S. economy has turned a corner after a recent soft patch.