Rate cut knocks Australian dollar The Australian dollar hit a three-week low on Tuesday after the Reserve Bank of Australia unexpectedly cut interest rates in an effort to combat weaker growth in the year ahead. The central bank cut rates by 25 basis points to 3.25 per cent, the lowest since 2009, as Glenn Stevens, governor, warned that slowing growth in China and the eurozone was likely to weigh on the Australian economy next year. The Aussie fell against all other major currencies, losing 0.6 per cent to a low of $1.0291 against the US dollar. It dipped 0.5 per cent against the Japanese yen to Y80.30 and fell 0.6 per cent against the euro to $0.7975. However, analysts noted that the falls in the Australian dollar were relatively muted. "The key to the longer-term impact of today's cut will be whether the market interprets it as merely bringing forward the rate cuts that were expected later in the year, or whether today's cut marks an acceleration in the pace of easing that will ultimately see rates fall further than previously thought," said Adam Cole, strategist at RBC Capital Markets. So far, the moderate reaction in local rate markets suggests the former, in which case ongoing damage to the Australian dollar should be limited. The euro rose against the dollar on reports that Spain could request a bailout at the weekend ahead of a meeting of eurozone finance ministers next Monday. However, many analysts remained cautious on the strength of any rally in the single currency if Spain did request aid, pointing to the eurozone's weak economic fundamentals. "While [a bailout request] may help to maintain the recent narrowing in Spanish credit spreads, it does nothing to alter the view that continued fiscal austerity merely serves to drive large economic divergences and uncertainty in the euro area," said Chris Turner, strategist at ING. "Manufacturing purchasing managers" indices look bleak and we imagine the ECB will soon be looking at methods to get the euro lower." Currency analysts were arguing that the euro-dollar could be stuck in a range for the foreseeable future given the uncertainty over the direction of the economy in both regions. "There are too many unknown factors as regards developments in the eurozone and the US for a breach of the range in either direction to be sustainable," said analysts at Commerzbank.