SYDNEY The euro was under pressure early in Asia on Tuesday, having fallen to a record low against the Australian dollar, as the euro zone appeared split on how to tackle the region's debt crisis.
The IMF urged euro zone finance ministers to increase the size of a 750 billion euros ($1 trillion) bailout mechanism for debt-stricken members, but Germany, Europe's biggest economy, rebuffed calls for a bigger financial safety net or joint euro bonds.
The inability of the region to come up with a common solution saw investors give the euro a wide berth, sending it to a record low against the Australian dollar at around A$1.3415.
Traders said the Irish budget outcome due later on Tuesday was shaping up to be the next focal point for markets.
"If the (Irish) parliament fails to approve proposals, we could see a fresh flare-up in euro zone tensions and the euro could fall sharply against major forex counterparts," said David Rodriguez, strategist at DailyFX.
Ireland, however, looked set to pass the toughest budget in the country's history, after an independent MP said on Monday he would support the plan and help the country access EU/IMF rescue funds.
The single currency was flirting with $1.3300, having slipped to a low of $1.3242 overnight, while it bought 109.95 yen, not far off Monday's low of 109.61.
The euro was seen supported at around $1.3268, a level representing the 61.8 percent retracement of the September to November rally. But Societe Generale strategists said it was still on track for a move below $1.3000, unless $1.3450 breaks.
For the dollar, traders said the fact the U.S. Federal Reserve could end up buying more than it's initially announced target of $600 billion in government bonds, as suggested by Fed Chairman Ben Bernanke on Sunday, meant it was not out of the woods yet.
The dollar index, which tracks the greenback's performance against a basket of major currencies, edged up 0.3 percent to 79.630 .DXY, having fallen in the last three sessions.
Support for the index was pegged at 79.226, the 38.2 percent retracement of the November 4 to November 30 rally. Against the yen, the dollar fetched 82.62 yen, not far off a two-week low of 82.51 yen set on Friday.
Prospects of more liquidity injection by the Fed kept commodity prices underpinned. The 19-commodity CRB index .CRB, a global benchmark for the asset class, rose for a fourth session on Monday to four-week highs. It was not far off a two-year high set last month.
This helped commodity currencies such as the Australian dollar hold on to most of the gains made recently. The Aussie last traded at $0.9892, not far off a two-week high of $0.9938 set on Friday.
The Reserve Bank of Australia (RBA) holds its monthly policy meeting Tuesday and is widely expected to hold rates at 4.75 percent, easily among the highest in the developed world.
The market is pricing in no chance of a hike so a steady outcome should not trouble the Aussie too much. The RBA's brief statement might move the market for a minute, though bank officials have said so much recently it is hard to see how it could contain anything new. The decision is announced at 0330 GMT.
"The RBA is expected to leave rates on hold and the need for further monetary tightening might not reappear until 2011 Q2," said David Watt, strategist at RBC Capital Markets.
(Editing by Wayne Cole)