SYDNEY, Jan 13 (Reuters) - The Australian dollar struggled to
regain ground on Wednesday as risky assets sagged across the
board in a knee-jerk selloff to China's surprise step towards
policy tightening.
The Aussie, which had struck multi-month highs on the yen, the euro and sterling only on Monday, barely rebounded after China's policy move sparked stop-loss selling and knocked out long positions on the Aussie.
Some investors were worried China may tighten further, threatening sales of Australian commodities. China is the world's No. 1 buyer of top Australian exports iron ore and coal.
'The Aussie is the obvious short-term victim from this,' JPMorgan said in a note.
The Aussie was soft on the yen at 84.12, after suffering its biggest daily drop in eight weeks in offshore trade on Tuesday. It traded at 85.55 seen here late Tuesday, and had hit a 15-month high of 86.20 only on Monday.
Against the U.S. dollar, the Aussie was down at $0.9234, from Tuesday's $0.9276, but well off a low of an offshore low $0.9172. There was market talk that Asian central banks were taking advantage of the Aussie's weakness to buy the currency.
Yet, some analysts markets should welcome China raising the reserve requirement ratio for banks as it prevents speculative bubbles from forming and protects the economy in the longer run.
'We do not think that the People Bank of China's move yesterday is the death knell for commodity currencies,' Barclays said.
'Policymakers will continue with an appropriately loose policy to encourage growth and that the bulk of the tightening in policy will occur in the second-half of 2010.'
The overall weakness spilled over into the Aussie's cross-rates against the euro and sterling, where it had made steep gains in recent days.
The Aussie pulled back to 0.6372 euros, off Tuesday's 0.6408, and a 26-month high of 0.6442 hit Monday.
Against sterling, the local dollar dipped to 0.5704 pounds , from Tuesday's 0.5676 and Monday's 25-year high of 0.5787.
In line with the dour mood in markets, Asian equities fell across the board, while local bond futures rose smartly, helped in part by safe-haven demand.
A well-received U.S. note auction on Tuesday also helped the sentiment on bonds.
Three-year futures added 0.08 points to 94.91 and
10
year futures added 0.105 points to 94.39.
----------------(Snapshot at 4:40 p.m./0540 GMT)--------------- FUTURES CASH YIELD
90
DAY BILL (MAR) 95.52 (+0.03) AUD3MOIS= 3.93 (3.94)
3
YR BOND (MAR) 94.91 (+0.08) AU3YT=RR 4.72 (4.88)
10
YR BOND (MAR) 94.39 (+0.105) AU10YT=RR 5.59 (5.70) AUD/USD 0.9231 (0.9277) US10YT=RR 3.73 (3.80) AUD VS 2-YR 10-YR *AUD 3-YR/10-YR SPREAD USD +352 (+357) +186 (+190) *FUTURES +0.52 (+0.550) CAD +316 (+321) +203 (+209) *AUD 2-YR/10-YR SPREAD NZD +20 (+23) -44 (-38) *CASH +114 (+120)
(Reporting by Koh Gui Qing)
((Guiqing.Koh@ThomsonReuters.com; Reuters Messaging; guiqing.koh.reuters.com@reuters.net; +61 2 9373 1821))
Keywords: MARKETS AUSTRALIA BONDS/FOREX (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
The Aussie, which had struck multi-month highs on the yen, the euro and sterling only on Monday, barely rebounded after China's policy move sparked stop-loss selling and knocked out long positions on the Aussie.
Some investors were worried China may tighten further, threatening sales of Australian commodities. China is the world's No. 1 buyer of top Australian exports iron ore and coal.
'The Aussie is the obvious short-term victim from this,' JPMorgan said in a note.
The Aussie was soft on the yen at 84.12, after suffering its biggest daily drop in eight weeks in offshore trade on Tuesday. It traded at 85.55 seen here late Tuesday, and had hit a 15-month high of 86.20 only on Monday.
Against the U.S. dollar, the Aussie was down at $0.9234, from Tuesday's $0.9276, but well off a low of an offshore low $0.9172. There was market talk that Asian central banks were taking advantage of the Aussie's weakness to buy the currency.
Yet, some analysts markets should welcome China raising the reserve requirement ratio for banks as it prevents speculative bubbles from forming and protects the economy in the longer run.
'We do not think that the People Bank of China's move yesterday is the death knell for commodity currencies,' Barclays said.
'Policymakers will continue with an appropriately loose policy to encourage growth and that the bulk of the tightening in policy will occur in the second-half of 2010.'
The overall weakness spilled over into the Aussie's cross-rates against the euro and sterling, where it had made steep gains in recent days.
The Aussie pulled back to 0.6372 euros, off Tuesday's 0.6408, and a 26-month high of 0.6442 hit Monday.
Against sterling, the local dollar dipped to 0.5704 pounds , from Tuesday's 0.5676 and Monday's 25-year high of 0.5787.
In line with the dour mood in markets, Asian equities fell across the board, while local bond futures rose smartly, helped in part by safe-haven demand.
A well-received U.S. note auction on Tuesday also helped the sentiment on bonds.
Three-year futures added 0.08 points to 94.91 and
10
year futures added 0.105 points to 94.39.
----------------(Snapshot at 4:40 p.m./0540 GMT)--------------- FUTURES CASH YIELD
90
DAY BILL (MAR) 95.52 (+0.03) AUD3MOIS= 3.93 (3.94)
3
YR BOND (MAR) 94.91 (+0.08) AU3YT=RR 4.72 (4.88)
10
YR BOND (MAR) 94.39 (+0.105) AU10YT=RR 5.59 (5.70) AUD/USD 0.9231 (0.9277) US10YT=RR 3.73 (3.80) AUD VS 2-YR 10-YR *AUD 3-YR/10-YR SPREAD USD +352 (+357) +186 (+190) *FUTURES +0.52 (+0.550) CAD +316 (+321) +203 (+209) *AUD 2-YR/10-YR SPREAD NZD +20 (+23) -44 (-38) *CASH +114 (+120)
(Reporting by Koh Gui Qing)
((Guiqing.Koh@ThomsonReuters.com; Reuters Messaging; guiqing.koh.reuters.com@reuters.net; +61 2 9373 1821))
Keywords: MARKETS AUSTRALIA BONDS/FOREX (If you have a query or comment on this story, send an email to news.feedback.asia@thomsonreuters.com) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.