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$A dropss after RBA announcement

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SYDNEY, Feb 5 AAP

February 05 2013, 5:44PM

The Australian dollar is a third of a US cent lower after the central bank kept the cash rate at three per cent and made some upbeat comments about the economic outlook.

At 1700 AEDT on Tuesday, the local unit was trading at 104.06 US cents, down from 104.37 cents on Monday.

In a statement accompanying the rates decision, Reserve Bank of Australia (RBA) governor Glenn Stevens said the global outlook was better after the US avoided the fiscal cliff and Chinese growth was stronger.

However, currency markets focused on Mr Stevens' comments that low inflation rates would give the RBA scope to cut the cash rate further, if need be, and that the mining boom would soon peak.

After the RBA announcement the Australian dollar fell to an intraday low of 103.93 US cents.

Easy Forex currency dealer Tony Darvall said there was very heavy selling of the Australian dollar after the RBA's statement.

"It's like the market was ready to sell," he said.

"We're looking at a situation that the RBA statement is undermining the Australian dollar."

Mr Darvall said the local currency was already under pressure before the announcement because of European political concerns.

Spanish Prime Minister Mariano Rajoy may have to resign because of a corruption scandal and former Italian prime minister Silvio Berlusconi is showing solid gains in polls ahead of national elections later in February.

"Those political worries have cut short the big rally we saw in equity markets," Mr Darvall said.

"If it was to go on for another two days, we would be in for a larger correction in equities markets."

He said if the Australian dollar was to fall out of the range it has traded in recently, and towards 103 US cents, it could prompt an even more significant fall.

"So today was pretty pivotal for he market, we could be looking at a new trend.

Mr Darvall said the fall in global stock markets and sentiment about Europe would most likely be the main drivers for the Australian dollar in coming days.