* RBA surprises markets with 50 bps rate cut, Aussie tumbles
* Dollar index hits 2-month low after lacklustre U.S. data
* Safe-haven yen hits 2-month high vs dollar
* Dollar/yen charts look bearish after major supports broken
By Neal Armstrong
LONDON, May 1 The Australian dollar fell sharply
on Tuesday after the Reserve Bank of Australia slashed rates by
a deeper-than-expected 50 basis points while soft data nudged
the U.S. dollar to a fresh two-month low versus the yen.
A sharp fall in business activity in the U.S. Midwest
combined with data on Monday showing Spain was in recession
dented investor appetite for risk and supported the safe-haven
yen, which also rose against the broadly weaker Aussie dollar.
Markets had been expecting a 25 basis point rate cut from
the Australian central bank (RBA) and the surprise drove the
Australian dollar down more than 1 percent to $1.0312
and to a three-month low near 82 yen.
The Aussie traded near a five-month low against sterling,
which rose above A$1.5700 despite a weaker than
expected survey of the UK manufacturing sector which pushed the
British currency down against the U.S. dollar.
Sterling pulled pulled back from an eight-month high of
$1.6304 hit on Monday, falling to a session low of
$1.6191 after the PMI data.
"The Aussie has further to go down in the near term but I
would be surprised if it went below the April lows around
$1.0225," said Ian Stannard, Head of European FX Strategy at
"The fact that the RBA moved more aggressively this time
should reduce the risk of follow-up cuts and ultimately provide
support to the currency," he added.
Market players say the currency could find support with
Australia still boasting the highest interest rate among major
currencies, at 3.75 percent.
The dollar fell 0.1 percent on the day to a fresh two-month
low of 79.64 yen as expectations U.S. interest rates will remain
on hold for some time to come were reinforced by Monday's U.S.
data which followed weaker-than-expected U.S. growth figures
"Dollar/yen is under pressure from expectations of low U.S.
interest rates and with risk appetite coming off the boil," said
John Hardy, currency strategist at Saxo Bank.
Japan's top financial diplomat said on Tuesday the rapid
appreciation of the yen since the end of last week reflected
market speculation and he was ready to act if needed.
With many in the market still holding short yen positions
built up as Japan eased monetary policy this year, traders and
strategists saw potential for a further reversal from the year's
highs above 84 yen.
"Key in our view might be that those that went long
dollar/yen above 82 yen are being forced to sell out of their
positions," ING said in a note.
Market players said dollar/yen charts looked bearish after
the pair broke below major supports such as the cloud top on its
weekly Ichimoku chart at 80.42 and the 50 percent retracement of
its February-March rally at 80.10.
The next key support was seen at the 100-day moving average
at 79.58 but some saw it testing more important support at
around 78.10, the cloud bottom on weekly Ichimoku charts.
The yen may still be hampered by speculation about further
monetary easing from the Bank of Japan even though the bank's
action last week, when it expanded government bond purchases,
was seen generally as an incremental rather than significant
Signs of weakening momentum in U.S. growth have rekindled
speculation further monetary easing could follow from the
Federal Reserve and kept the dollar under pressure as it hit a
two-month low versus a basket of currencies at 78.622.
Fresh data on the U.S. economy will be released at 1400 GMT
when ISM manufacturing PMI is forecast to come in at 53.0 versus
53.4 in March. U.S. non-farm payrolls are the big event of the
week on Friday, expected to
The euro edged up 0.2 percent to a four-week high
above $1.3270 in thin trade. With many European centres closed
for the May Day holiday, light volumes were expected to persist
before Thursday's European Central Bank meeting and weekend
elections in Greece and France.