Rates At 0530 GMT Latest Change AUD/USD 1.0180 -1.12% AUD/JPY 78.43 -1.17% 6.5% May, 2013 3.5076% -0.1429 4.5% Mar, 2020 4.0050% -0.0990 10-Yr Spread To U.S. +214 bps +10 bps SFE Dec 3-Year Futures 96.60 +0.13 SFE Dec 10-Year Futures 95.895 +0.13 SYDNEY (Dow Jones)--Renewed worries about Europe's ability to handle its debt crisis pushed the Australian dollar lower Tuesday. Only days after newly-formed governments in Italy and Greece helped risk-sensitive assets like the Australian dollar gain steadily, worries about whether these new governments can implement effective austerity measures reversed much of the gains on Tuesday. One of the factors was a disappointing auction of Italian debt that weighed on equities across the globe. This hand-in-hand trade between the Australian dollar and stocks had Sue Trinh, a currency strategist at RBC Capital Markets, saying the local currency could be in for more roughness ahead. "We would caution about expressing any bullish view on the Aussie against the U.S. dollar. Too much of that cross is geared to equity markets and well, if you know where equity markets are going for certain, go for it," said Trinh, adding the biggest risk is to the downside for the Australian dollar against the U.S. dollar on the back of still robust European debt worries. At 0530 GMT, the Australian dollar was trading at US$1.0180, down from US$1.0295 late Monday. Against the yen, the currency changed hands at Y78.43, down from Y79.36. Helping the Australian dollar from falling further, the Reserve Bank of Australia said its decision to cut interest rates at the start of November reflected a desire for a more neutral monetary policy, but the bank signaled that the effect of an ongoing mining boom still posed the risk of needing to have interest rates back at a more restrictive level. Deutsche Bank foreign exchange strategist John Horner said the minutes signaled that "the case for back to back (rate cuts) is less likely than the market has priced." In the wake of the growing European worries, which helped bonds surge on both ends of the curve on Tuesday, the interest rate swaps market is currently pricing in a 100% chance of a rate cut by the RBA in December even though nearly all of the economists surveyed by Dow Jones Newswires expect the RBA to stay on hold. -By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com

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