LONDON (MarketWatch) - The dollar and the yen lost ground against most major currencies Tuesday, slipping as equity markets rose on a further rise in risk appetite, strategists said.
The arrival of Election Day in the United States appears to have brought a little bit of relief to markets in general, said Stephen Gallo, head of markets analysis at Schneider Foreign Exchange.
Tokyo stocks surged early Tuesday, while other Asian markets were mixed. See Asia Markets.
European indexes were mostly higher. See Europe Markets.
The euro traded at $1.2753, up from $1.2641 in North American trade late Monday. The British pound was slightly higher at $1.5863 versus $1.5835. Policymakers from both the Bank of England and the European Central Bank are expected to cut interest rates later this week.
The dollar bought 99.40 yen, up from 99.04 yen.
The dollar index , a measure of the greenback against a trade-weighted basket of six currencies, fell to 85.829 from 86.350 late Monday.
Pre-election polls showed Sen. Barack Obama of Illinois, the Democratic presidential nominee, holding a strong lead over his Republican challenger, Sen. John McCain of Arizona.
"For today we would expect the U.S. dollar to consolidate in European trading as markets will most likely wait for the first results of U.S, presidential election," said Marcus Hettinger, currency strategist at Credit Suisse in Zurich.
But strategists said the final outcome of the election wasn't likely to be a major driver for currency markets.
Strategists at UniCredit MIB noted that the euro failed Monday to hold gains above $1.30, "confirming its intrinsic fragility."
Hettinger said attention is likely to turn back to the "synchronized" global growth slowdown in coming weeks, which will likely underpin currencies from countries with current-account surpluses, such as the Japanese yen and the Swiss franc.
Meanwhile, the Reserve Bank of Australia cut its cash rate by three-quarters of a percentage point Tuesday to 5.25%, exceeding expectations for a half-point cut. See full story.
The yen gained immediately after the move, boosted by expectations that other central banks will also cut sharply and reduce the attractiveness of carry trades, said Alastair Chan, a Sydney-based economist with Moody's Economy.com.
The Australian dollar was up 1.1% against the U.S. dollar in recent action at 68.38 U.S. cents. The Aussie also turned higher against the Japanese unit, rising 1.6% to 68.06 yen.
