* Euro declines to record low vs Aussie dollar
* Policy decisions due this week in euro zone, U.S., UK
* Expectations for ECB actions high, but bank may disappoint
By Wanfeng Zhou
NEW YORK, July 30 The euro fell on Monday ,
hitting a record low against the Australian dollar, on worries
the European Central Bank may disappoint investors hoping for
more actions to contain the debt crisis.
Expectations for the ECB, which holds its policy meeting on
Thursday, have grown sharply after P r esident Mario Draghi said
last week the bank would do whatever it takes to save th e euro,
a message echoed by German Chancellor Angela Merkel and French
President Francois Hollande.
Some in the mark et speculated the ECB may reactivate its
bond-buying program to help r educe S panish and Italian borrowing
cost s, but many were skeptical because Ge rmany has repeated its
opposition to such a step. [ ID:nL6E8IT375]
"Traders were in a 'show me' mode with enthusiasm fading
over last week's comments by both Mario Draghi and Angela Merkel
in support of the euro," said Boris Schlossberg, managing
director of FX strategy at BK Asset Management i n New York.
German Economy Minister Philipp Roesler warned the ECB about
any large-scale government bond purchases and a German
government spokesman on Monday reiterated Berlin's opposition to
any form of mutualisation of euro zone debt.
The euro fell 0.6 percent to $1.2241, retreating from
a three-week high of $1.2389 hit on Friday but holding above a
two-year low of $1.2040 hit Tuesday, according to Reuters data.
Adding to bearish sentiment was the euro's failure to close
above a key technical level near $1.2325 on Friday.
Still, near-term losses in the euro could be limited as
traders were unlikely to place large bets ahead of the ECB
meeting, analysts said.
"Clearly, if nothing is announced that would be a massive
disappointment," said Callum Henderson, global head of FX
research for Standard Chartered Bank in Singapore. "But there is
an expectation that we're going to see something meaningful on
Analysts said the ECB might instead explore new policy tools
such as outright asset purchases, or quantitative easing,
something its peers in Britain, the United States and Japan are
already using to stimulate growth.
There have also been recent suggestions it could empower
national central banks to broaden their asset buying abilities.
Markets will keep an eye on any comments from U.S. Treasury
Secretary Timothy Geithner, who is due to discuss the U.S.,
European and global economies with German Finance Minister
Wolfgang Schaeuble and Draghi on Monday.
Markets were bracing for a busy week, with central bank
decisions due in the United States and the UK as well as the
euro zone, in addition to key U.S. jobs data on Friday.
The euro fell 0.9 percent to 95.80 yen, though it
remained above last week's low of 94.09 yen, its lowest level
against the Japanese currency in more than 11-1/2 years.
It also struggled against the Swedish crown, which hit a
12-year high after data showed the Swedish economy grew much
more than expected in the second quarter. The euro
fell 1.5 percent to 8.3370 crowns.
The Australian dollar rallied, reaching a record
high of around A$1.1652 against the euro and a
four-month high of $1.0499 versus the U.S. dollar.
Many market players said the Australian currency's gains
could be vulnerable however, given its close correlation with
the global growth outlook.
"People are selling euro/Aussie and that provides
Aussie/dollar with an indirect degree of support. But exposure
there is pretty big if we get any negative economic developments
in Asia and if Draghi and (Federal Reserve Chairman Ben)
Bernanke do not deliver," said Daragh Maher, FX strategist at
"Our view is we would sell Aussie on any firm break above
The Federal Reserve begins a policy meeting on Tuesday and
its decision will be announced on Wednesday, but economists
expect policymakers to sit on their hands for now.
The dollar was steady at 82.786 against a basket of major
currencies, rebounding from a three-week low of 82.343 on
Friday. Against the yen, the dollar eased 0.3 percent to 78.18