Reuters: US Dollar Report: FOREX-Yen retreats, Aussie rises as China data cheers

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FOREX-Yen retreats, Aussie rises as China data cheers Apr 2nd 2012, 06:20 Mon Apr 2, 2012 2:20am EDT * China March PMI jumps to 11-month high * Aussie dollar shines as Chinese hard landing fears ease * Yen may resume downtrend as fiscal year-end flows fade * Weaker-than-expected BOJ tankan weighs on yen By Ian Chua and Masayuki Kitano SYDNEY/SINGAPORE, April 2 (Reuters) - The safe-haven yen eased and the Australian dollar rose on Monday after surprisingly strong Chinese factory activity data eased fears about a hard landing by the world's second-biggest economy. The Australian dollar rose 0.5 percent to $1.0399 after a report on Sunday showed activity at big Chinese factories hit an 11-month high in March. "This is telling you that there is no hard landing," said Rob Ryan, an FX strategist at BNP Paribas in Singapore. The upbeat data provided some respite for the Aussie dollar, which had hit a two-month low of $1.0305 last week as investors fretted about the chance of a sharp economic slowdown in China, Australia's single biggest export market. After jumping to $1.0470 in early Asian trading on Monday, up more than a full cent compared with its levels in late U.S. trade on Friday, the Aussie dollar later pared some of its gains, hurt in part by surprisingly weak Australian housing data. Against the yen, the Aussie climbed to 86.30, pulling well away from last week's trough around 84.60. Apart from a brighter economic outlook overseas diluting the yen's safe-haven status, it was also hurt by a weaker-than-expected reading in the "tankan" survey of sentiment at big Japanese manufacturers, which put the spotlight on whether the Bank of Japan may conduct additional monetary easing as early as next week. "Personally I don't think that will happen," said a trader for a major Japanese bank in Singapore, on chances of the BOJ conducting further monetary easing in April. "But I get a strong sense that there is interest to put on speculative bets, led by offshore players," he said, adding that hedge funds were cited as buyers of the dollar against the yen on Monday morning. The yen fell broadly, with the dollar rising 0.2 percent to 83.05 yen and the euro up 0.2 percent at 110.80 yen . The euro held steady against the dollar at $1.3339. JAPAN'S NEW FISCAL YEAR With Japan's fiscal year-end out of the way, there is now less chance of the yen drawing support from seasonal fund repatriation by Japanese companies, market players say. "Seasonal factors that have been holding back dollar/yen for the past two weeks or so have been eliminated and it's plain sailing from here on in," said Gareth Berry, associate director of G10 FX strategy for UBS in Singapore. "At least that's the sort of view from the international investment community," Berry said, adding that UBS was looking for the dollar to rise to 85 yen in three months. Besides the possibility of U.S. Treasury yields heading higher in the coming months if optimism about a sustained U.S. economic recovery increases, the BOJ's monetary policy was another factor that could help lift dollar/yen, he said. The Japanese central bank has two policy meetings this month, a two-day meeting on April 9-10 and another gathering on April 27. "If they decide to keep policy on hold on April 10, they can always choose to ease further on April 27," Berry said. "The BOJ has more meetings than any other G10 central bank, so there's plenty of scope for further easing throughout the rest of this year and perhaps as soon as this month." In a sign of bearish market sentiment against the yen, a gauge of market positioning shows that currency speculators had ramped up net short positions in the yen in the week ended March 27 to the highest since July 2007. Link this Share this Digg this Email Reprints

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