Reuters: US Dollar Report: FOREX-Dollar slides vs euro, yen; Aussie dollar tumbles

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FOREX-Dollar slides vs euro, yen; Aussie dollar tumbles May 1st 2012, 13:32 Tue May 1, 2012 9:32am EDT * RBA surprises markets with 50 bps rate cut, Aussie tumbles * Safe-haven yen hits 2-1/2 month high vs dollar * Euro higher, but may struggle to add gains By Gertrude Chavez-Dreyfuss NEW YORK, May 1 (Reuters) - The dollar fell to a one-month low against the euro and to a 2-1/2 month trough against the yen on Tuesday in thin trading, weighed down by recent weak U.S. economic data that has rekindled speculation about a further round of monetary easing. The Australian dollar, meanwhile, fell sharply after the Reserve Bank of Australia slashed rates by a deeper-than-expected 50 basis points. A sharp fall in business activity in the U.S. Midwest and other data on Monday showing Spain was in recession dented investor appetite for risk and supported the safe-haven yen, which also rose against the broadly weaker Aussie dollar. "Investors have focused on the recent spell of soft U.S. economic reports, which have added to the case for additional Fed easing in the months ahead -- a decidedly negative story for the dollar," said Omer Esiner, chief market analyst at Commonwealth Foreign Exchange in Washington. With many of Europe's trading centers closed for the May Day holiday, investors have shifted attention away from the underlying debt issues in Spain and Italy. Esiner pointed out that while U.S. economic reports this week would likely keep the dollar broadly pressured, "the euro will struggle to add to recent gains as long as major debt issues in Spain and Italy remain largely unresolved." In early New York trading, the euro edged up 0.2 percent to a four-week high at $1.3277. Light volumes were expected before Thursday's European Central Bank meeting, Friday's U.S. non-farm payrolls report and weekend elections in Greece and France. The Australian dollar fell 0.9 percent to US$1.0324 , sliding to a three-month low near 82 yen. Markets had been caught flat-footed by the RBA move, as markets had been expecting just a 25-basis-point rate cut. The Aussie traded near a five-month low against sterling, which rose above A$1.5700 despite a weaker-than-expected survey of the UK manufacturing sector that pushed the British currency down against the U.S. dollar. "The RBA move means we no longer see a cut in June, but data in the coming months will be of particular focus in the wake of this rather unprecedented cut," said TD Securities in a research note. "We are now calling for another 25-basis point cut in Q3." Against the yen, the dollar hit more than a two-month low to 79.62. Expectations U.S. interest rates will remain on hold for some time to come were reinforced by Monday's U.S. data, which followed weaker-than-expected U.S. growth figures last week. The dollar last traded at 79.82 yen, little changed on the day. Japan's top financial diplomat said on Tuesday the rapid appreciation of the yen since the end of last week reflected market speculation and that he was ready to act if needed. With many in the market still holding short yen positions built up as Japan eased monetary policy this year, traders and strategists saw potential for more declines from the year's highs above 84 yen. Sterling, meanwhile, pulled back from an eight-month high of $1.6304 hit on Monday, falling to a session low of $1.6191. Link this Share this Digg this Email Reprints

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