TOKYO Reuters -- The euro fell near a one-week low against the dollar on Tuesday amid talk of more sanctions against Moscow after international outrage over Ukraine civilian killings.
The Australian dollar was flat, as it hovered near a commodities price rally-fuelled nine-month high ahead of the country's central bank's decision on interest rates later in the day.
The United States and European countries pledged on Monday to punish Moscow over civilian killings in northern Ukraine, where a mass grave and tied bodies of people shot at close range were found in a town seized from Russian forces.
The deaths in Bucha, outside Kyiv, has drew pledges for further sanctions against Moscow from the West, possibly including some restrictions on the billions of dollars in energy that Europe still imports from Russia. The Kremlin denied any accusations related to the murder of civilians.
The euro's single currency dropped to as low as $1.0960 in the previous session for the first time since March 28 and dropped as low as $1.0975 at $1.0975. It had reached a one-month high of $1.1185 just days earlier in the day, amid increased optimism for an end to the Ukraine conflict.
The dollar index, which held near a one-week high of 99.083 reached overnight, was boosted by the euro's woes. It was last at 98.949.
The dollar fell to 122.5 yen, a 0.20% drop in long-term U.S. Treasury yields, as it continued to consolidate around 122.5 after retreating from a multi-year high of 125.105 on March 28.
The Bank of Japan Governor Haruhiko Kuroda put some pressure on the currency pair, saying the recent pace of appreciation was somewhat rapid and policymakers are watching moves carefully. The Aussie was flat at $0.7541, close to Monday's high of $0.75565, a level not seen since July 6.
The Reserve Bank of Australia is expected to hold the key rate at a record low of 0.1% on Tuesday, but investors will be watching to see whether it will revert to a statement that the Board is prepared to be patient about tightening from its post-meeting statement.
Such a change in language will reinforce our call for the RBA to raise the cash rate at its June meeting and support AUD, Commonwealth Bank of Australia strategist Carol Kong wrote in a client note.
The bank's estimate of Australian fair value has increased over the past month due to the strong increase in commodity prices, which has boosted the bank's estimate of fair value to a $0.82 to $0.95 range, centred on $0.89, she wrote.