Aussie falls as Reserve Bank of Australia holds rates steady
By William L. Watts, MarketWatch
FRANKFURT (MarketWatch) — The U.S. dollar gained ground on safe-haven flows, while the euro extended losses versus major rivals on a combination of worries about global growth prospects and nervousness over the outcome of Greece’s private-sector bond swap.
The ICE dollar index DXY +0.38% , which measures the U.S. currency against a basket of six major rivals, rose to 79.717 from 78.309 in North American trade late Monday.
The euro EURUSD -0.54% traded at $1.3136 versus the dollar, down from $1.3226 on Monday.
The euro, along with other assets viewed as risky, such as equities, extended declines Tuesday morning after a news report said an Institute of International Finance memo warned that a messy Greek default could do 1 trillion euros ($1.36 trillion) of damage to the euro zone. Read about IIF.
Investors will be attempting to gauge participation in the debt swap, which closes Thursday night. The exchange aims to knock more than €100 billion off of Greece’s debt load and is part and parcel of the country’s second bailout, which is needed to ensure that Athens avoids default later this month.
China stokes growth worries
“The markets now await the resolution of Greek [debt-swap] deal which is due in two days and skittishness may prevail until currency traders are assured that the exchange goes off without a hitch,” said Boris Schlossberg, director of currency research at GFT.
Meanwhile, nervousness remains over global growth prospects. China stirred worries on Monday when it cut its 2012 growth target to 7.5%, down from the 8% target it pursued over the previous eight years.
The Japanese yen also benefitted from safe-haven flows. The dollar fetched 81.08 Japanese yen USDJPY -0.57% , down from ÂĄ81.45.
The Australian dollar AUDUSD -0.83% fell 0.8% versus its U.S. counterpart to trade at $1.0595 in recent action. The Reserve Bank of Australia left interest rates on hold in a widely expected move on Tuesday. Read about the RBA rate decision.
“With growth expected to be close to trend and inflation close to target, the board judged that the setting of monetary policy remained appropriate for the moment,” RBA Gov. Glenn Stevens said in comments accompanying the decision.
“A steady policy decision from the RBA overnight may have been expected but the combination of a dovish tone in the minutes, growth concerns in China and a worse-than-expected current-account release have conspired to knock AUD/USD further from its recent lofty levels,” said Jane Foley, senior currency strategist at Rabobank International in London.
The British pound GBPUSD -0.49% traded at $1.5776 versus the dollar, down from $1.5871.
