Forex- Aussie weaker ahead of RBA rate announcement, cut seen likely

Investing.com - The Australian dollar held weaker on Tuesday ahead of the latest central bank view on the cash rate with chances for a cut seen as likely.

AUD/USD traded at 0.7763, down 0.04%, while USD/JPY changed hands at 120.14, down 0.01%.

The Reserve Bank of Australia's cash rate decision is due at 1430 Sydney time (0330 GMT) with another close call expected as the market is pricing in a 50% chance of a 2 basis points cut from a record low 2.25%.

Also in Australia are fourth quarter current account balance and January building approvals data at 1130 (0030 GMT). The current account is expected to show a deficit of A$11.0 billion, compared with an A$12.3 billion deficit in the third quarter. Building approvals data is expected to show a fall of 1.8% month-on-month, compared with a 3.3% drop in December.

Japan reports January preliminary wages at 1030 Tokyo time (0130 GMT) with average cash earnings seen up 0.6% year-on-year.

Overnight, the dollar extended gains against a basket of other major currencies on Monday, even after data showed that U.S. manufacturing activity expanded at the slowest pace in 13 months in February, as an upbeat U.S. growth report published on Friday continued to support.

In a report, the Institute for Supply Management said its index of purchasing managers fell to 52.9 last month from a reading of 53.5 in January. Analysts had expected the manufacturing PMI to decline to 53.0 in February.

Separately, the Commerce Department reported that U.S. consumer spending slid 0.2% in February after falling 0.3% in the previous month. Economists had forecast a 0.1% decline.

The dollar remained supported after the Commerce Department reported on Friday that U.S. gross domestic product grew at an annual rate of 2.2% in the last three months of 2014, down from an initial estimate of 2.6% but ahead of expectations for a downward revision to 2.1% growth.

The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted at 95.51, down 0.01%.

The single currency strengthened earlier, after Eurostat reported that the annual rate of consumer inflation declined 0.3% in February, better than forecasts for a drop of 0.4%, following a 0.6% decline the previous month.

Core inflation, which strips out food and energy costs, was unchanged from January at 0.6%.

Another report showed that the euro zone’s unemployment rate fell to a 33-month low of 11.2% in January, down from 11.3% in December. It was the lowest level since April 2012.

The euro’s gains were capped however, as investors turned their attention to the upcoming European Central Bank meeting on Thursday, where it was expected to announce details of its quantitative easing program.