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• Australian dollar slides in response to RBA rate cut

• EWA 0% Rate It

The Australian dollar lost ground in trading today, falling about 1 percent against the U.S. dollar, the Japanese yen, the British pound and the euro. The main driver for the decline came from the Reserve Bank of Australia, which slashed rates without warning by 50 basis points.

Over the past year, the Australian currency performed fairly well against the euro, gaining more than 6 percent since last April, while declining 5 to 6 percent against the yen and the U.S. dollar.

"In our view, the risk of further cuts has clearly risen and we remain bearish on the Australian dollar," currency trading analysts from Credit Suisse told the Financial Times . 

Australia's commodity export-dependent economy remains tightly tied to China and that nation's industrial growth; mining giants like Rio Tinto ( RIO ) supply the world's second-largest economy with massive quantities of iron, coal and aluminum to sustain its building boom.

Chinese growth looked somewhat sluggish in the first quarter: Gross domestic product increased 'just' 8.1 percent, the lowest number in almost three years. On the plus side, manufacturing activity appears poised for something of a recovery, as its Purchasing Managers Index ticked up to 53.3 in April from 53.1 in March.

The RBA may be taking its monetary policy cues from the trends in China and the rest of East Asia, with the rate cut aimed at stimulating a little more domestic growth, investment and spending. The Aussie dollar's relative strength over the last two years - up more than 12 percent against the U.S. dollar and more than 13 percent against the euro - have hurt those domestic industries which rely heavily on exports, like the country's famed wool farmers.

The news had a limited downside impact on the iShares MSCI Australia Index ETF ( EWA ), which slipped 0.2 percent to $23.79 per share .

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