USD Nearing Three Month Low

By: Hillel Fuld

The USD hovered close to  a three-month low versus a variety of currencies on Tuesday as a result of the perception that the
U.S. growth outlook is declining, forcing the Federal Reserve to keep interest rates at a minimal level.

The Australian Dollar

The AUD dropped after retail sales and building approvals data in Australia disappointed bulls.

But the Aussie cut losses after the Reserve Bank of Australia's post-meeting statement contained no worrying surprises, prompting players to cover short positions in the currency.

The RBA kept its benchmark interest rate steady at 4.5 percent, as was expected, and said policy was appropriate given past rate raises, moderating inflation and some uncertainty about the global future outlook.

The Australian dollar was down 0.1 percent at $0.9115 off the day's low of $0.9090 hit after the data. It struck a three-month peak of $0.9146 on Monday. Against the yen, it slipped 0.3 percent to 78.77 yen AUDJPY=R.

The EUR stayed near a three-month peak after having broken above a key Fibonacci retracement level, helped by improved risk appetite as a result of more than decent manufacturing data from Europe.

The Euro slipped 0.1 percent to $1.3165, but was near the three-month high of $1.3196 hit on Monday, when stop-loss orders were triggered after it broke above $1.3125, a 38.2 percent Fibonacci retracement of its decline from November to June.

The currency's advance could be slowed by option barriers at $1.32 and $1.3250, although a break through those levels could open the way for it to reclaim $1.3510, a 50 percent retracement of its six-month fall to early June.

Risk Appetite

Investors' rising risk appetite could push up the pair beyond the 10-week peak of 114.74 yen hit last week, although there will be a resistance at 115 yen, where Japanese exporters are likely to place fresh sell orders, said a trader at a Japanese brokerage house.

The dollar index .DXY stood at 80.96, flat from late Monday but just above Monday's three-month low of 80.792.


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