The Australian dollar declined slightly Tuesday

Rates At 0530 GMT Latest Change AUD/USD 1.0170 -0.44% AUD/JPY 79.12 -0.68% 6.50% May, 2013 3.1678% -0.1284 4.50% Mar, 2020 3.7992% -0.0682 10-Yr Spread To U.S. +194 bps -2 bps SFE Dec 3-Year Futures 96.88 +0.13 SFE Dec 10-Year Futures 96.05 +0.05 SYDNEY (Dow Jones)-- The Australian dollar declined slightly Tuesday, hurt in part by a decision from the country's central bank to lower its key cash rate target. The move by the Reserve Bank of Australia, or RBA, which lowered its benchmark rate to 4.25% from 4.50% in an afternoon decision, will weigh on yield-hungry investors that have piled into the Australian dollar for the past 18 months. The RBA's decision also highlights how concerned the nation's leaders are about potential contagion from Europe's debt crisis. "European developments were pretty high on their reasons to cut rates and is the main reason more rate cuts may come," said Besa Deda, chief economist at St. George Bank. "The deeper the crisis in Europe, the greater the downside risk to the global economy, and more likely the RBA may tap on the accelerator further." At 0530 GMT, the Australian dollar was trading at US$1.0170, down from US$1.0215 late Monday. Against the yen, it changed hands at Y79.12, down from Y79.64. John Horner, head of foreign exchange strategy for Deutsche Bank in Sydney, said the Australian dollar could weaken further once London trading kicks. He said that could present a buying opportunity for the currency against the U.S. dollar. More sustained losses for the Australian dollar are likely against the Canadian and New Zealand dollars "given the contrast in what the RBA is doing this week in cutting rates and given the Bank of Canada and (Reserve Bank of New Zealand), where they are very likely to be on hold." While the currency slid, Australian bond futures gained, especially at the short end of the curve. The three-year bond futures contract recently added 13 ticks to 96.88. Such a move is consistent with an expectation, held among others by Westpac's chief economist, Bill Evans, that the December rate cut may be a prelude to more next year. "We would expect the next move to be February, being a 25 (basis point) cut to be followed by a further reduction in May," Evans said. --By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com (Data provided by Reuters) (END) Dow Jones Newswires