Reuters: US Dollar Report: FOREX-Aussie dollar holds some gains from mixed China data

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FOREX-Aussie dollar holds some gains from mixed China data Jun 3rd 2013, 03:32 Sun Jun 2, 2013 11:32pm EDT * Aussie climbs after China official PMI beat expectations * HSBC PMI underwhelming but Aussie remains buoyant * Dollar edges up against yen as Nikkei narrows losses * Tapering QE3 could be risky if stocks fall - analyst By Sophie Knight and Ian Chua TOKYO/SYDNEY, June 3 (Reuters) - The Australian dollar came off early highs on Monday as a private survey showed factory activity weakened in China last month, dampening some of the optimisim drawn from an official survey that had raised hopes that the world's second largest economy, and Australia's main export market, may be stabilising. The Aussie climbed as high as $0.9640 in thin early trade, 0.7 percent higher than late U.S. levels on Friday, in reaction to China's official purchasing manager's index (PMI). The official survey, released on Saturday, beat market expectations by rising to 50.8 in May from 50.6 in April. "The AUD opened higher this morning on the good news, and remains the outperformer so far," said Annette Beacher, head of Asia-Pacific Research at TDSecurities. But the Aussie later pared gains to $0.9619 as the HSBC unofficial PMI for China slipped to 49.2, the lowest level since October 2012 and down from April's 50.4. In contrast to the HSBC survey, which focuses on smaller, private sector firms, the official PMI focuses on larger state-owned companies. Support for the Aussie is eyed at $0.9528, a 19-month trough plumbed in May, when it dropped 7.7 percent for its worst monthly fall since September 2011. Last month the Aussie even fell 4.8 percent against the broadly underperforming yen, but on Monday the Aussie gained 0.3 percent to 96.76 yen. The U.S. dollar also gained 0.3 percent on the Japanese currency, firming to 100.70 yen, as the Nikkei stock index remained under pressure, falling 2.8 percent before recovering slightly. Volatility in the Japanese benchmark stock index has weighed on the yen for the past week and a half, with the Nikkei having fallen 16 percent since hitting a 5-1/2 year peak on April 12. The dollar-yen was also toppled from a 4-1/2 peak of 103.74 hit on May 22, but has been prevented from piercing the psychologically important 100 yen level as investors remain bullish on the dollar after the last strong non-farm payrolls. The greenback added 1.9 percent in May against a basket of currencies as the jobs data contributed to an improving economic landscape, prompting speculation that the Federal Reserve might start unwinding its massive stimulus programme sooner rather than later heated up. Figures on Friday showed currency speculators have raised their bets in favour of the greenback to the highest since at least June 2008 in the week ended May 28. On Monday, the dollar index dipped 0.2 percent to 83.327 as investors waited for an all-important U.S. employment report on Friday. Fed officials have said the central bank will only begin tapering its bond-buying programme if economic indicators continue strengthening. "Judging what will happen if they unwind QE3 is tricky, because on the one hand Treasury yields will rise, but on the other hand stocks may fall. But it would be a positive for the dollar-yen, so that could help the Nikkei," said Koji Fukaya, CEO of FPG Securities. Analysts at BNP Paribas said they were expecting another upbeat U.S. employment report on Friday. "While data in line with our estimates would not in itself warrant an early Fed move to taper asset purchases, it would still leave risks skewed in favour of less, rather than more, Fed accommodation and would probably be sufficiently robust to maintain the overall bullish market consensus with respect to the USD," they wrote in a client note. "We see scope for USD to regain momentum versus the CHF and JPY coming out of this week, although we are more neutral on the USD vs. the EUR and commodity bloc currencies." Link this Share this Digg this Email Reprints

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