Australian dollar fell in Asian trading on Tuesday

Australian dollar fell in Asian trading on Tuesday

The Australian dollar pushed sharply lower Tuesday as renewed fears Europe's debt crisis could spread to Italy and Spain heightened risk aversion.
Australian bonds were helped by the concerns, with bonds at both ends of the curve rallying.
New International Monetary Fund chief Christine Lagarde said it's too early to discuss "the conditions and terms and lengths and volume" of a second Greek bailout, setting off the decline in risk-sensitive assets, such as the Australian currency and equities across Asia. Her comments come on the heels of a euro-zone finance ministers' statement that said they are considering boosting the scope of a financial stability fund, while taking a tougher line on Greece's private creditors.
At 0615 GMT, the Australian dollar was at US$1.0600, down from US$1.0717 late Monday. Against the Japanese yen, the Australian dollar was at Y84.72, down from Y86.55.
Richard Grace, chief currency strategist at Commonwealth Bank of Australia, warned Tuesday's slide could be a harbinger of more to come.

"This is not an environment where the Aussie goes up. You've got a U.S. dollar bid in the market, commodities declining, and equity markets declining as risks cloud markets," said Grace, who tipped support at US$1.0515 and then US$1.0400.
Still, he said there was some solace in the fact that the Aussie was up against the euro and New Zealand dollar, and flat against the British pound.
Market participants will next be watching the release Wednesday of China's gross domestic product, industrial production, retail sales and fixed asset investment.
Citing the troubling news on offshore economies, and a drop in business confidence in National Australia Bank's monthly business survey released Tuesday, JPMorgan Chief Economist Stephen Walters revised the firm's forecast for the next interest rate hike from Australia's central bank to November from August.
A similar feeling was evident in the swaps market, with traders now pricing in a 40% chance of a rate cut come August.
"There has been enough bad news released in recent days -- sagging business confidence today, a lousy U.S. payrolls result Friday, and an escalation and broadening of the sovereign crisis in Europe -- to suggest that (Reserve Bank of Australia) officials are likely to extend their policy pause for a few more months," said Walters.
Still, Walters said the central bank will raise rates soon enough, forecasting 75 basis points of tightening between now and the end of 2012.