WSJ: WORLD FOREX: Dollar Mixed, Euro Falls with Equities
By Nicholas Hastings
Of DOW JONES NEWSWIRES
LONDON (Dow Jones)--Global sentiment took a turn for the worse Tuesday, leaving the dollar mixed to higher in Europe.
Optimism over the global recovery took another knock after the Reserve Bank of Australia admitted that the pace of further Australian rate increases is an "open question."
A lot of attention has been given to policy moves in Australia in recent weeks as it was the first major economy to start moving rates higher since the credit crunch.
The suggestion that the central bank is already turning equivocal about further rate increases will contribute to uncertainty about the global upturn.
Federal Reserve Chairman Ben Bernanke had already done his bit on Monday with a dovish assessment of the global economy, suggesting the central bank isn't about to start removing its extraordinarily loose monetary regime. In a speech in New York, Bernanke also said that the Fed will "help ensure that the dollar is strong."
All this provided the dollar itself with only limited support.
Altogether, however, these developments appeared to remove some of the optimism that has been helping equity markets.
Asian markets tumbled as the price of gold also backed down from its recent high around $1,144 an ounce.
The Shanghai Composite Index bucked the trend and rose. But the Nikkei Index in Japan lost 0.6% and the European share markets all started about 0.5% lower.
This helped to drive the high-yielding currencies such as the euro lower against low-yielders such as the yen.
The slump in global appetite for risk came as U.S. President Barack Obama's visit to China came to an end with little sign that any progress had been made in pushing Beijing to allow the yuan to appreciate in the near term.
At 1020 GMT, the dollar had fallen to Y88.99 from Y89.08 late on Monday in New York, according to EBS.
The euro fell to $1.4913 from $1.4972 and to Y132.85 from Y133.34.
The dollar was also up at CHF1.0130 from CHF1.0077.
The pound rose to $1.6845 from $1.6831 after Andrew Sentance, a member of the Bank of England's monetary policy committee, said the U.K. economy has emerged from recession despite official figures showing that the economy contracted by 0.4% during the third quarter.
The pound was also helped by consumer price data showing a slightly larger-than-expected increase in prices last month. Analysts said that this probably marks the start of an upturn in headline inflation over the next few months but underlying levels should remain subdued.
-By Nicholas Hastings, Dow Jones Newswires; 44 20 7842 9493; nick.hastings@dowjones.com
