NEW YORK—The U.S. dollar slipped versus most major rivals, and its Australian counterpart gained after the country's central bank left rates unchanged as expected.
In midday trade, the euro was at $1.2424 compared with $1.24 late Monday. The dollar traded at ¥78.69 compared with ¥78.25, while the euro was at ¥97.764 from ¥97.02. The pound bought $1.5650 compared with $1.5599, while the dollar fetched 0.9670 Swiss franc from 0.9689 franc.
The dollar index, which measures the U.S. unit's performance against a basket of six major rivals, slipped to 82.16 from 82.175 in North American trade late Monday. The WSJ Dollar Index fell to 71.35 from a close of 71.40 on Monday.
The Australian dollar rose to a five-month high, peaking at $1.06 against the U.S. dollar, after the country's central bank kept its interest rates on hold. The Aussie recently traded at $1.0572 from $1.0569 late Monday.
The Reserve Bank of Australia's decision to leave rates on hold was little more than a "temporary distraction" for the currency pair, said Elsa Lignos, currency strategist at Royal Bank of Canada in London.
The central bank left its key lending rate at 3.5% after cutting it by a total of three-quarters of a percentage point in May and June.
A steeper-than-expected 1.7% fall in German factory orders in June had little lasting effect on the dollar-euro currency pair. Data showed Italy's economy saw a 0.7% quarterly contraction in the second three months of the year after a 0.8% contraction in the first quarter.
U.K. manufacturing output and industrial production both posted steep monthly declines in June, falling by the largest amounts since November 2008, in part due to an extra holiday to celebrate Queen Elizabeth II's Diamond Jubilee. The declines were smaller than forecast, however, and could lead to a slight upward revision to U.K. second-quarter gross domestic product, economists said.
The euro traded at 1.2015 Swiss francs, up 0.1% from Monday. The Swiss National Bank said its total foreign reserves grew by 41 million francs ($42.3 million) in June, giving it additional firepower to sell the shared currency and defend its 1.20 floor for the euro/Swiss franc cross, Ms. Lignos said.
The SNB last year moved to arrest the rise of the franc, vowing to buy euros and sell francs in order to defend the 1.20 Swiss franc level.
Strategists said the dollar saw little impact from remarks by Boston Federal Reserve Bank President Eric Rosengren, who said the Fed should embark on an open-ended bond-buying program, according to a report in The Wall Street Journal. Ms. Rosengren is not a voting member of the Federal Open Market Committee this year.
"The policy prescription of Rosengren is at one extreme and will no doubt be tempered by the moderate views of other Fed officials," said Michael Derks, chief strategist at FxPro in London. "If the Fed were to travel down this path of unlimited [quantitative easing], then it would have significant (negative) ramifications for the dollar. It would also incur the wrath of international policy makers and investors."
Mr. Rosengren's prescription has little chance of being adopted now, but Federal Reserve Chairman Ben Bernanke would be likely to consider such an approach if the economy falls back into recession later this year or in early 2013, Mr. Derks said.
