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By Alice Ross
The euro fell against the dollar amid fresh concerns over how soon Madrid would request a bailout, erasing earlier gains after Spain’s borrowing costs fell at an auction.
The single currency dipped 0.5 per cent to a low of $1.3045 even as Spain’s 12-month T bills fell under 3 per cent at a primary auction of short-term debt, as risk appetite continued to wane after US announced a fresh round of monetary easing the previous week.
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Reported comments from Soraya Sáenz de Santamaria, Spain’s deputy prime minister, casting doubt on how soon the country would request aid also helped the euro to fall.
The Australian dollar dipped 0.4 per cent to $1.0426 after the Reserve Bank of Australia noted the recent “sharp decline” in commodity prices while unemployment remained relatively low. The RBA raised the prospect of a rate cut in the future if there was a “significant deterioration” in its outlook for growth, although it said that the Australian dollar was only “somewhat” overvalued at its present levels.
The dollar fell slightly against the yen, dipping 0.1 per cent to Y78.59 as the Bank of Japan embarked on a two-day meeting, with some investors cautious that the bank could seek to ease monetary policy further in light of the Japanese currency’s recent strength.
Osamu Takashima, currency analyst at Citigroup, said that the effect of any easing by the BoJ was not yet priced into the yen, even though it had weakened in the past two sessions in anticipation.
“Though the forex market has begun to discount easing this week, it must not have been fully priced in. The BoJ’s action tomorrow therefore could cause some surprise depreciation in the yen,” he said in a note.
Meanwhile, the UK pound erased earlier losses and was flat against the dollar at $1.6250 after figures showed that UK inflation continued to ease in August in line with expectations, falling to 2.5 per cent on an annual basis, down from 2.6 per cent the previous month.
