LONDON -- 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, Mr. 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.
