Investing.com - The Australian dollar moved lower against the U.S. dollar Wednesday, as uncertainty over European plans to augment the region’s debt rescue plan and a downgrade to Spain’s credit rating helped to lift the safe-haven greenback.
AUD/USD hit 1.0233 in early Asian trade, the pair’s lowest since Tuesday; the pair subsequently consolidated at 1.0253, falling 0.11%.
The pair was likely to find support at 0.9906, last Thursday’s low, and short-term resistance at 1.0416, the high of September 12.
On Tuesday, Moody’s Investors Service reduced Spain’s investment grade to A1 from AA2, with a negative outlook. On October 14 Standard & Poor’s downgraded Spain’s rating, following a Fitch Rating’s cut of Spain to its fourth highest investment grade on October 7.
“Spain continues to be vulnerable to market stress and event risk while already moderate growth prospects for the nation have been scaled back further,” Moody’s said in a statement following the announcement.
Earlier in the day, conflicting reports surfaced on the progress of negotiations to augment the European Financial Stability Facility rescue fund for debt-threatened euro-zone nations.
Reports that Germany and France had agreed to raise the EFSF to EUR2 trillion were vehemently denied by officials, while German Chancellor Angela Merkel said that the European Union summit in five days would mark an “important step” but not the final one in addressing the region’s debt crisis.
In the U.S., the Bureau of Labor Statistics reported that producer price inflation more by a seasonally adjusted 0.8% in September, up from a flat reading in August, and higher than market expectations of 0.2% for the period.
The more closely watched producer price index, excluding food and energy costs, gained 0.2% in September, above expectations of a 0.1% rise and up from 0.1% in August.
Separately, the Westpac/Melbourne Institute’s Leading Index of economic indicators
rose to 0.8% in August from 0.6% in July. Westpac said that it was “expecting growth momentum in the Australian economy in the second half of 2011 at an annualized pace of around 1.5%.”
In Sydney, Australian shares moved higher in early Wednesday trade, with the benchmark S&P/ASX 200 rising 0.73% to 4,217.80.
Meanwhile, the Australian dollar was lower against both the euro and the Japanese yen, with EUR/AUD gaining 0.18% to hit 1.3423, and AUD/JPY down 0.16% to hit 78.70.
The National Australia Bank’s quarterly business confidence survey of economic conditions in Australia was due out later Wednesday.