LONDON (April 4): The yen gained on Tuesday as a risk-averse investors flocked to the safe-haven currency, while Australia's dollar sank to a three-week low after its central bank raised concerns about domestic labour conditions.
Investor appetite for risk has been dulled this week by factors including nerves ahead of an upcoming meeting between US President Donald Trump and Chinese President Xi Jinping and a suspected suicide bombing in St. Petersburg, Russia.
The US dollar extended Monday's losses and was down 0.4% at 110.46 yen after hitting 110.335, its lowest in a week in Asian trading. The euro fell 0.6% to a four-month low of 117.585 yen, and the Australian dollar fell 0.7% against the yen.
"(The yen buying) is based on broad-based risk-off since yesterday. There was a tragedy in Russia and there may be some hedging-type buying ahead of the French presidential debate and also French elections in three weeks," said Yujiro Gato, currency analyst with Nomura in London.
"Clearly risk sentiment is not good at the moment."
Monday's largely positive US construction spending and manufacturing data affirmed a steady improvement in the economy, but did little to uphold Treasury yields and the US dollar.
The euro was 0.2% lower at US$1.0652, with an earlier overnight advance tempered by a sharp decline in German bond yields driven by flight-to-safety following the bombing in St. Petersburg.
The Reserve Bank of Australia's decision to keep its cash rate at a record low of 1.5% on Tuesday came as little surprise. But the Aussie fell after the central bank hinted it was not too confident about domestic labour and inflation conditions.
The Australian dollar lost nearly 0.6% to reach a three-week low of US$0.7562, having declined steadily over the past two weeks from a four-month high of US$0.7750.
The New Zealand dollar sank to a three-week low, moving in tandem with the Aussie and down 0.5% on the day.
"The FX market got the message that the RBA does not want to abandon its neutral approach any time soon and is trading Australian dollar slightly weaker following the interest rate decision," Commerzbank analysts wrote in a note to clients.