Australia central bank holds rates steady

The dovish views from the Reserve Bank of Australia, one of the most aggressive central banks to tighten policy in the wake of the global financial crisis, illustrates that Australia’s once-in-a-century mining boom isn’t enough of a buffer to stave off the impact of a slowing global economy.

Until recently the RBA had been warning that capacity constraints and expected inflation pressures were its primary concern, but the bank’s July policy statement—while adopting similar language from previous months—was laced with uncertainty relating to Europe’s debt crisis and the aftermath of Japan’s earthquake and it said domestic growth in 2011 will now likely be weaker than its 4.25% forecast.

Trichet may save face with S&P, Fitch on Greece: Standard & Poor’s and Fitch Ratings may enable European Central Bank President Jean-Claude Trichet to support a private investor rollover of Greek debt by saying a default rating would be partial and temporary.

Trichet put Greece’s fate in the hands of ratings companies when bank officials began saying in May the ECB, which has lent 98 billion euros ($142 billion) to Greek banks, would refuse to accept the nation’s bonds as collateral if any “burden sharing” by private investors produced a default rating. Growing support for a rollover helped push the yield on Greece’s 2-year bond down 320 basis points to 26.2 percent since June 27.

Trichet and European political leaders have been at odds over creditors’ role in a new Greek rescue after last year’s 110 billion-euro bailout failed to stop the spread of the region’s debt crisis.

Danish bank profits to suffer on funding squeeze: Denmark’s banks face a decline in earnings as the fallout from Europe’s toughest resolution laws sends funding costs higher in the Nordic country, Moody’s Investors Service Senior Vice President Janne Thomsen said.

“We are worried about the loans to farmers, still worried about commercial real estate and we are also worried about the earnings of the banks because funding is going to be, and has shown to be, much more costly than it was in the past,” Thomsen said in a telephone interview.

The June 24 failure of Fjordbank Mors A/S, a regional lender with about $1.4 billion in deposits, underlined the Danish state’s commitment to resolution laws that force senior creditors to share losses, Moody’s said in a note.