Forex Today: RBA stays put, US Dollar benefits from risk aversion

Here is what you need to know on Tuesday, September 5:

Following Monday's choppy action, markets seem to have turned cautious early Tuesday. The Australian Dollar stays under heavy bearish pressure following the Reserve Bank of Australia's (RBA) policy announcements and the US Dollar benefits from the risk-averse atmosphere. S&P Global will release revisions to August PMI data, Eurostat will publish Producer Price Index (PPI) data for July and the US economic docket will feature July Factory Orders later in the day.

Following the September monetary policy meeting, the RBA announced that it left the policy rate - the Official Cash Rate (OCR) - unchanged at 4.10%, as widely expected. The bank reiterated that "some further tightening of monetary policy may be required," in its policy statement and noted that higher interest rates are working to establish a "more sustainable balance" between supply and demand. AUD/USD turned south following the RBA event and was last seen losing 1.3% on a daily basis at 0.6375.

Meanwhile, the data from China showed that Caixin Services PMI declined to 51.8 in August from 54.1, reviving concerns over a slowdown in the Chinese economy. Reflecting the souring market mood, the Shanghai Composite Index fell nearly 1% and the Hang Seng Index lost close to 2%.

Following a three-day weekend, US stock index futures were down 0.3% at the time of press. The US Dollar Index was trading at its highest level since late May near 104.50 and the 10-year US Treasury bond yield was flat near 4.2%.

Pressured by the renewed USD strength, EUR/USD started to stretch lower in the early European morning and was last seen trading near 1.0770.

GBP/USD closed the first day of the week in positive territory but retreated back below 1.2600 early Tuesday, erasing all the gains it registered on Monday.

USD/JPY gained traction early Tuesday and advanced to the 147.00 area. Jibun Bank Services PMI in Japan came in at 54.3, matching the flash estimate and the market expectation.

Gold price closed flat near $1,940 on Monday but came under modest bearish pressure early Tuesday, with the 10-year US Treasury bond yield holding steady following the upsurge seen on Friday.