Reuters: US Dollar Report: FOREX- Dollar builds on bounce against yen, weak China data hits Aussie

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FOREX- Dollar builds on bounce against yen, weak China data hits Aussie Jun 10th 2013, 06:07 Mon Jun 10, 2013 2:07am EDT * Dollar stronger across the board, bought back after jobs report * Aussie under pressure after more lacklustre China data disappoints * BOJ meeting begins, steps to curb JGB volatility eyed By Sophie Knight TOKYO, June 10(Reuters) - A sharp bounce in the Japanese stock market on Monday helped the dollar move further away from a two-month low against the yen plumbed in the previous session, while the Australian dollar skidded after disappointing data from China, its biggest export market. The greenback rose to 98.26 yen, some 3.5 percent higher than a trough of 94.98 hit on Friday that marked its lowest level since April 4, when the Bank of Japan unleashed an audacious easing programme that accelerated the yen's slide. Its drop on Friday came as investors scrambled to digest a highly-anticipated U.S. labour market report that showed a slightly better-than-expected 175,000 jobs were created in May, but unemployment was up 0.1 percent to 7.6 percent. "The U.S. jobs figures were strong, but not strong enough to increase expectations that the Fed will taper QE3," said Junya Tanase, executive director of forex at JPMorgan in Tokyo. Tanase said an end to the Federal Reserve's easing programme could curb risk appetite if it raises dollar funding costs for investments into emerging markets. However, trimming the bond-buying stimulus will not necessarily raise those costs as it does not equate to tightening, he added. Treasury yields began rising after the labour report, spurring investors to snap up the greenback after having unwound their dollar-longs earlier in the week on disappointing private-sector jobs data. On Monday, the dollar was further emboldened by a 4.9 percent jump in Japan's Nikkei share average, in a sharp rebound aided by upbeat domestic data and easing Fed stimulus jitters. The yen saw a broad rebound last week as the Japanese stock market skidded, prompting investors to pare back the dollar hedges they put in place when it was heading up. Investors have become fixated on improvements in the U.S. employment situation as it is a condition for the U.S. Federal Reserve to begin winding back its $85 billion-a-month bond buying programme, known as QE3, earlier than scheduled. The dollar index added 0.3 percent to 81.916 after plunging to a more than three-month low of 81.077 on Thursday. That tightened the clamp on the Australian dollar, which stumbled 0.9 percent to $0.9430 after diving to a 20-month low of $0.9393 in earlier trade after the weekend's unexpectedly weak trade data and signs of weak domestic demand in China, the country's biggest export market. China's economy grew at its slowest pace for 13 years in 2012 and so far this year economic data has surprised on the downside, prompting warnings from some analysts that the country could miss its growth target of 7.5 percent for this year. The dollar's gains against the yen led the euro higher against the Japanese currency. It added 0.6 percent to 129.67 , after briefly tapped 129.99, the 50 percent retracement of its drop from a 3-year high of 133.82 hit on May 22 to a low of 126.19 on Friday. High hopes for Abenomics, the brand of economic policy touted by Japanese Prime Minister Shinzo Abe, have faded in recent weeks as the dollar-yen and stocks have dropped, while bond yields have risen-the opposite of what the BOJ was apparently aiming for. Investors are hoping that Bank of Japan Governor Haruhiko Kuroda will address recent volatility in the markets in comments after the central bank's two-day policy meeting finishes on Tuesday. "One of the market's main focuses right now is (lack of) stability in the JGB market... as over the last couple of months, everyone is very interested in what Kuroda has to say," said Shinichiro Kadota, currency strategist at Barclays in Tokyo. Kadota said that some investors are hoping that the Bank of Japan could extend the duration of its fixed-rate lending to two years at the end of a two-day policy meeting that begins on Monday. That would make it easier for banks to hedge against increases in yields, reducing their need to sell bonds and thereby curbing recent volatility and spikes in JGB yields. Link this Share this Digg this Email Reprints

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