Euro subdued, Aussie off lows ahead of RBA rate call
SYDNEY (Reuters) - The euro languished near a three-month low on Tuesday as investors kept a wary eye on political developments in Italy, while commodity currencies proved resilient with the Australian dollar bouncing off an eight-month trough.
Gains on Wall Street, despite steep losses in many Asian bourses on Monday, helped sparked a revival in risk sentiment that saw the Aussie dollar jump towards $1.0200 from a low of $1.0116.
By contrast, the other major currencies were much more subdued. The euro traded at $1.3025, finding a steadier footing after Friday's slide to $1.2966. The common currency was also little changed on the yen at 121.80.
The U.S. dollar drifted to a one-week high of 93.73 yen, continuing to recover slowly from last week's violent slide to 90.85. It was last at 93.48.
Investors in Asia took fright on Monday after China announced fresh tightening measures to cool its housing sector, darkening sentiment in a market already fretting about prospects of a new Italian election and U.S. budget spending cuts.
But risk assets were later thrown a lifeline after the U.S. Federal Reserve's influential vice chair, Janet Yellen, said the central bank's aggressive monetary stimulus is warranted given how far below its full potential the economy is operating.
A slew of central bank policy meetings this week will also be closely watched, starting with the Reserve Bank of Australia which makes its announcement at 0330 GMT.
The RBA is considered almost certain to keep its cash rate unchanged at a record low 3.0 percent, having already lowered it by 175 basis points in the past 15 months.
The central bank is expected to reiterate an easing bias if needed, and markets still have at least one quarter-point cut priced in over the next 12 months. Some think it will not have to pull the trigger again.
"Our economics team think that while the easing bias remains in place for several more months, we've see the low in rates," said Kit Juckes, strategist at Societe Generale.
Later in the week, the Bank of Japan, European Central Bank and Bank of England all hold their respective meetings. The BOJ and the ECB are both expected to hold steady, while the BOE is seen under mounting pressure to relaunch its bond buying programme.
Sterling was at $1.5115, having skidded to a 2-1/2 year low of $1.4985 last Friday.
Analysts at Barclays Capital said case for further easing by the ECB was also growing.
"Due to the economic weakness signalled by the poor PMI data for February, the chance of another cut in the refinancing rate appears higher to us than a month ago, especially if the ECB lowers both the growth and inflation outlooks again," they wrote in a client note.
Any dovish signal from the ECB could see the euro come under pressure, traders said.
(Editing by Wayne Cole)