Australian dollar slumps after rate cut The Australian dollar slumped on Tuesday after the Reserve Bank of Australia unexpectedly eased monetary policy in an effort to fight the currency's strength and the economy's weaknesses. The Aussie fell 0.8 per cent against the US dollar to $1.0165 and 1.2 per cent against the Japanese yen to Y100.62 after the RBA cut its benchmark cash rate by 0.25 percentage points to a record low of 2.75 per cent. It is the seventh time the RBA has lowered rates since November 2011 in its effort to stimulate industries outside the mining sector and offset the impact of the strong dollar. The Aussie has gained 25 per cent against its US counterpart since 2010 when it sat at $0.80. Lee Hardman at Bank of Tokyo-Mitsubishi noted the RBA left the door open to more easing by reiterating that "the inflation outlook would afford scope to ease further, should that be necessary to support demand." Mr Hardman expects the RBA to lower its cash rate to 2.50 per cent by the end of 2013. The euro gained 0.1 per cent to $1.3083 against the dollar on the back of stronger-than-expected German factory orders in March. Barclays" Thomas Harjes was quick to point out that the positive momentum was still tentative. The single currency was also held in check by European Central Bank president Mario Draghi who repeated that the ECB would "watch all the incoming data on the euro-area economy in the next weeks and if necessary we'll be ready to take further action." Greg Fuzesi at JPMorgan said, despite Mr Draghi's words, the central bank continued to move very slowly and incrementally, "partly because it wants to keep the pressure on governments and banks to solve the root causes of the crisis and because it has not given up on the idea of a recovery later this year." CFTC data showing that euro shorts lessened modestly last week lent credence to BNP Paribas" belief that more softness in European data will not cause significant damage to the euro. The euro traded up 0.6 per cent against sterling at £0.8459, but Valentin Marinov at Citi suggested that UK industrial and manufacturing production data on Thursday, alongside the Bank of England's meeting, might "underscore the diverging cyclical outlook for the eurozone and the UK" and weigh on the single currency.