Catalyzes the reduction of phosphonoacetaldehyde to 2-hydroxyethylphosphonate, a step in the biosynthesis of phosphinothricin tripeptide. Phosphinothricin tripeptide is both a natural-product antibiotic and potent herbicide. Can use both NAD and NADP but the preferred substrate is NAD. 2-hydroxyethylphosphonate + NAD(+) = H(+) + NADH + phosphonoacetaldehyde Antibiotic biosynthesis; phosphinothricin biosynthesis. Cells retain the ability to produce phosphinothricin tripeptide when grown in liquid culture but, the amount of PTT produced is lower. Belongs to the iron-containing alcohol dehydrogenase family.