The Australian dollar lost ground overnight falling a cent to USD0.8700 in a volatile offshore trading session following weaker US housing data and concerns over Europe.
The Aussie broke past 0.8850 US early offshore last night after China's announcement saw commodities prices climb to a five week high.
Latin American currencies firmed on Tuesday as stronger-than-expected German economic data offset concerns that Europe's efforts to confront debt troubles may crimp global economic growth.
The Bank of Canada said on Tuesday that China's move to loosen its foreign exchange controls was an important step forward.
The U.S. dollar and euro fell against the yen on Tuesday as investors turned risk-averse amid persistent doubts about China's move to make the yuan flexible and renewed worries about European banks' funding needs.
The dollar rallied for a second straight day against the euro on Tuesday as new concerns about the funding needs of European banks offset stronger-than-expected German economic data.
Weak May U.S. housing data undercut stocks and sent U.S. Treasuries up, while Europe grappled with a fresh tremor to its banking system after Fitch downgraded French bank BNP Paribas (BNPP.PA).
Latin American currencies struggled for direction early on Tuesday as investors became more skeptical of China's vow to ease control over its foreign exchange rate.
Benchmark bank-to-bank euro lending costs edged higher on Tuesday as demand for funds increased before the quarter end and the expiry of the European Central Bank's 442 billion euro one-year refinancing operation.
The dollar gained for the second straight day against the euro on Tuesday as new concerns about the funding needs of European banks offset stronger-than-expected German economic data.
The euro retreated from a one-month high against the dollar on Tuesday, tracking a pullback in the yuan a day after China's pledge to allow its currency to trade more freely had spurred risk demand.
The Chinese yuan slipped on Tuesday, giving back more than half the previous day's rally,with hefty dollar buying by state-owned banks suggesting the central bank was using new tactics to stir two-way trade and limit yuan gains.
Weaker commodity stocks and banks pushed Britain's top share index lower early on Tuesday, after gains in the previous session, as confidence prompted by China's decision to give its currency more flexibility faded.
Dollar funding costs edged higher on Tuesday as China's yuan slipped, dashing bets that Beijing may allow it to appreciate more rapidly after a pledge to make the currency more flexible.
South Korea plans to lower eventually the ceiling on currency derivatives for branches of foreign banks, bringing it at par with that imposed on domestic banks, a senior finance ministry official said on Tuesday.
Gold gained on Tuesday after China's central bank raised the yuan's mid-point, spurring early buying in the euro that encouraged bargain hunting after bullion dropped sharply from a record high the previous day.
The euro retreated from a one-month high against the dollar on Tuesday, tracking a pullback in the yuan a day after China pledged to allow its currency to trade more freely.
The Chinese yuan slipped on Tuesday as big state-owned banks heavily bought dollars, a move that suggests the central bank has adopted a new strategy to control the pace of yuan gains.
The euro slipped on Tuesday, giving back gains made after China set the yuan's mid-point at its highest since the yuan's revaluation in 2005, as players wondered how fast the Chinese authorities would let their currency rise.
The AUD has opened lower this morning currently trading around USD0.8765 as profit taking entered the market following the announcement from the Chinese central bank regarding the Chinese Yuan.
Commodity currencies rallied on Friday, with the Aussie advancing to a new monthly high reaching 0.8712 USD.
Caterpillar Inc (CAT.N), the U.S. machinery giant that sells billions of dollars of earth-moving equipment and other products to China each year, said on Saturday it was heartened by China's move to gradually make the yuan more flexible, saying it would help lift U.S. exports.
Private forecasters have raised their 2010 estimates for Canada's economic growth, saying the near-term outlook has improved further since a March survey, the Canadian Finance Department said on Monday.
Leaders of some of the Group of 20 nations meeting in Canada this weekend will want to hear more about how China plans to make its currency more flexible, Canadian Finance Minister Jim Flaherty said on Monday.
The overall risk to Canadian financial stability has increased over the past six months as mounting concerns over sovereign debt erupted in financial markets, the Bank of Canada said on Monday.
The Australian and New Zealand dollars rose to their highest levels in about a month on Monday after China let the yuan rise to a five-year high,raising optimism about global economic recovery.
Canadian Finance Minister Jim Flaherty said on Monday that China's decision over the weekend to give its yuan currency more flexibility was quite encouraging
China's move to allow greater currency flexibility will raise pressure on exports in the short term, but will be good for competitiveness in the long run, state media on Monday quoted a Commerce Ministry official as saying.
Financial market stress eased further on Monday as investors cheered Beijing's vow to make its currency more flexible, but interbank euro funding costs rose again with excess money market liquidity set to drop.
The euro and Australian dollar hit their highest against the U.S. dollar in about a month on Monday after China allowed the yuan to rise to a post-revaluation high, boosting demand for riskier currencies.
