Reuters: US Dollar Report: FOREX-Euro & AUD sharply higher, China trade data eyed

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FOREX-Euro & AUD sharply higher, China trade data eyed Sep 9th 2012, 22:47 Sun Sep 9, 2012 6:47pm EDT * Euro near four-month highs vs USD * Aussie dollar not far off Friday's two-week peak * Stimulus hopes bolster risk appetite * Chinese trade numbers due next By Ian Chua SYDNEY, Sept 10 (Reuters) - The euro hovered near four-month highs on Monday, while commodity currencies also held firm after soft data in the United States and China reinforced hopes of more stimulus from the world's two biggest economies. The single currency, already bolstered by the European Central Bank's plan to help lower borrowing costs for stressed members, stood at $1.2802, having rallied more than 1 percent on Friday to a high of $1.2815. Traders said the break of the June peak around $1.2750 was technically bullish for the euro. Initial resistance is seen at Friday's session high, then the May peaks of $1.2820/25. The rally in the single currency saw the dollar index slump to a fresh four-month low of 80.151. Against the yen, the greenback fetched 78.24, not far off a five-week trough around 78.02 plumbed Friday. Data on Sunday revealed Chinese factories ran at their slowest rate for 39 months in August, while the U.S. payrolls report on Friday showed jobs growth slowed sharply last month. In a Reuters poll conducted after those jobs numbers, economists gave a 60 percent chance to the Fed embarking on a fresh round of asset-buying, or QE3, this week. This compared with 45 percent in a late August poll. "The weak payrolls report has put QE3 firmly on the agenda for this week, hence risk-on remains the most likely scenario for Monday's open," said Annette Beacher, head of Asia-Pacific Research at TDSecurities. More stimulus from the Fed would make it attractive for investors to use the U.S. dollar as a funding currency to buy higher yielding assets in carry trades. Not surprisingly, that helped drive the Australian dollar to a two-week high just above $1.0400. Remarkably, the Aussie has retraced 50 percent of its Aug. 9 to Sept. 6 fall within two sessions. It was last at $1.0373. Initial support is seen around $1.0355, a level corresponding to the 55-day moving average as well as the session high for Aug. 31. The market is now awaiting Chinese trade data due around 0100 GMT. Another set of weak numbers would add more pressure for Beijing to take swift policy action. The authorities encouraged markets last week by announcing $150 billion-worth of infrastructure projects. "Expect a soft trade data report, where there is a material risk that export growth slips into the negative in August, temporarily weakening the AUD," TD's Beacher added. "We believe the data flow in the last two weeks is necessary and sufficient for the PBoC to announce lower RRRs/policy rates as soon as this week, joining the global central bank heavyweights in boosting growth." Link this Share this Digg this Email Reprints

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