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    Aussie retraces earlier weakness as RBA holds steady at 1.75%

    The Aussie retraced earlier weakness in Asia on Tuesday as the central bank held steady as expected and politics in Australia dominated sentiment, while the yen gained on safe-have status and the pound fell.

    USD/JPY changed hands at 102.11, down 0.46% in early Asia. AUD/USD traded at 0.7528, down 0.16% with markets awaiting the final results of the federal elections and braced for wrangling by lead parties to form a coalition government.

    The Reserve Bank of Australia's cash rate held steady at 1.75% following the board meeting Tuesday, noting financial market volatility.

    GBP/USD traded at 1.3256, down 0.23%.

    In Australia, exports rose 1% and imports gained 2% month-on-month for May, and the trade balance came in at a deficit of A$2.21 billion, wider than the A$1.5 billion seen. Also in Australia comes retail sales for May rose 0.2%, compared with a 0.3% gain seen month-on-month.

    In China, the Caixin services PMI for June came in at 52.7, better than the level seen at 52.3, and up from 51.2 the previous month.

    "Some companies commented that new projects and firmer client demand had boosted sales in the latest survey period," said Caixin in a statement.

    "Service sector growth is now supporting the overall economy, and the expansion for services is coming at a time when the manufacturing index is contracting, suggesting the nation's economic structure is becoming more balanced. The government must continue to relax service sector controls to encourage its development and push forward the nation's economic transformation," said Zhong Zhengsheng, Director of Macroeconomic Analysis at CEBM Group in Caixin's PMI release.

    Earlier in New Zealand, the NZIER business confidence survey for the second quarter reached 19%, from 2% previously, with capacity utilization at 92.9%, a dip from 93.2%.

    NZD/USD traded at 0.7197, down 0.40%, after the survey.

    Also earlier in Australia, the AIG services index for June came in at 51.3, a tad down from 51.5 the previous month.

    The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, rose 0.10% to 95.71.

    Overnight, the dollar slipped back lower against the other major currencies on Monday, as investors remained cautious amid ongoing uncertainty over the global effects of the Brexit vote. GBP/USD edged up 0.16% to 1.3288, still close to the 31-year low of 1.3122 set on June 27, a level not seen since 1985.

    Research firm Markit and the Chartered Institute of Purchasing & Supply said on Monday that their U.K. construction purchasing managers' index fell to 46.0 in June from May’s reading of 51.2.

    Economists had expected the index to drop to 50.5 in June.

    The pound has already been under heavy selling pressure since Britain shocked markets by deciding to leave the European Union, sparking uncertainty over the consequences of the U.K. vote on the country’s economy and the global economy as a whole.

    Adding to pressure on the U.K. currency, Bank of England Governor Mark Carney indicated late last week that more stimulus may be needed over the summer, fuelling expectations for an upcoming rate cut.

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      The fundamentals support the AUD, that is why we all have to pay attention to the trading instruments with this currency.

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