Dec. 7 (Bloomberg) -- Australia’s dollar declined after the central bank held interest rates steady and called them “appropriate,” curbing speculation on widening yield premiums on the nation’s assets. New Zealand’s dollar also slipped after commodities retreated from an advance.
The Aussie fell for a second day against the U.S. dollar after the Reserve Bank of Australia left the overnight cash rate target at 4.75 percent. It rose to a three-week high as commodities surged after U.S. lawmakers reached an agreement to sustain tax reductions, then resumed a drop as raw materials declined.
“Increasingly, the risks are that now the RBA will be sidelined till the middle of 2011,” said Sue Trinh, a senior currency strategist in Hong Kong at Royal Bank of Canada. “The Aussie’s direction is going to be dependent on European peripheral developments.”
Australia’s dollar fell 0.2 percent to 98.77 U.S. cents at 12:51 p.m. in New York, from 98.99 cents yesterday. It rose as high as 99.65 cents, the strongest since Nov. 12. The Aussie was up 0.6 percent to 82.30 yen, from 81.82. New Zealand’s dollar dropped 0.1 percent to 76.07 U.S. cents, from 76.17, and strengthened 0.6 percent to 63.35 yen, from 62.95 yen.
The Reuters-Jefferies CRB Index of raw materials fell 0.6 percent after earlier rising as much as 1.1 percent.
RBA Governor Glenn Stevens said inflation likely will be contained through the middle of next year and noted the market’s growing concern about the creditworthiness of some European nations.
Irish Finance Minister Brian Lenihan cut spending and raised taxes by 6 billion euros ($8 billion) to deal with what he called the “worst crisis in our history” as the government seeks to seal an 85 billion-euro ($113 billion) international aid package. European Union and International Monetary Fund officials agreed to the package to keep Europe’s sovereign-debt crisis from spreading.
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