Reuters: US Dollar Report: FOREX-U.S. dollar rebounds, Australian dollar firms on China data

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FOREX-U.S. dollar rebounds, Australian dollar firms on China data Aug 9th 2013, 13:51 Fri Aug 9, 2013 9:51am EDT * Aussie gains on China output, gains seen fleeting * Dollar finds base after five straight losing days * Dollar down on week as U.S. bond yields ease * Traders preoccupied with when Fed will start tapering By Julie Haviv NEW YORK, Aug 9 (Reuters) - The dollar rebounded from a recent seven-week low against a basket of currencies on Friday as investors bought at cheaper levels, with talk about when the Federal Reserve will begin cutting back its monthly bond buying dominating market chatter. The Australian dollar, meanwhile, rose to its highest in more than a week against the greenback, bolstered by upbeat factory data from China, though strategists warned the Aussie's rebound could be temporary. China, the world's second largest economy, said factory output rose 9.7 percent in July, beating forecasts, and retail sales grew 13.2 percent while inflation held steady. The Australian currency rose 0.7 percent to $0.9162 , extending its 1.2 percent gain the previous day on stronger-than-expected trade data from China, Australia's biggest export market. The Aussie recovered smartly from a three-year low of $0.8848 hit on August 5. "The lack of pricing pressures allows for further stimulus from Chinese monetary and fiscal authorities, helping to boost investor confidence about growth going forward," said Boris Schlossberg, managing director of foreign exchange at BK Asset Management. "Although this appears to be nothing more than a relief rally within an overall downtrend, the unit (Aussie/dollar) could try to climb towards the 9300 level over the next few days before hitting any meaningful resistance," Schlossberg said. The Aussie could be vulnerable to a strengthening U.S. dollar as the Federal Reserve is expected by some to scale back its stimulus program in September. The dollar index was up 0.2 percent at 81.118. It had hit a trough of 80.868 on Thursday, its lowest since June 19. "We see a rebound after a three-year low. We're back up due to some improvement in China data but we think it is a short term rebound," said Bernd Berg, global FX strategist at Credit Suisse. He added that the Aussie continues to lose rate support and is also significantly overvalued, forecasting it to fall to $0.85 in three months. The Reserve Bank of Australia cut its main cash rate to a record low of 2.5 percent this week. In contrast, U.S. Federal Reserve policymakers have hinted in recent weeks that the central bank could start to scale back its $85 billion monthly bond-buying in September, but this will depend on further improvement in the job market. Thursday's weekly jobless claims data showed layoffs fell to their lowest since late 2007. Dallas Fed President Richard Fisher reiterated on Thursday that the central bank remained open to trimming its bond purchases from September if economic data keeps improving, and there was no fresh information due on Friday that would help clarify the situation. "There are some key U.S. indicators next week, including the retail sales, so I think the market will focus on that. If you do get stronger data the dollar should move higher," said Kiran Kowshik, currency strategist at BNP Paribas. The dollar dropped this week as U.S. bond yields eased. U.S. 10-year Treasury yields remain below the highs above 2.70 percent seen before last week's U.S. payrolls data, and the spread between similarly-dated German and Japanese bonds have narrowed in the past few days. That has prompted investors to trim long dollar positions. As a result, the euro hit a seven-week high of $1.3401 on Thursday and was last down 0.2 percent on the day at $1.3358 . The currency drew strength from an above-forecast German trade surplus on Thursday and Wednesday's much stronger-than-expected German factory data. The U.S. dollar slipped 0.4 percent to 96.32 yen, giving up some of overnight gains and edging towards a seven-week low of 95.79 yen hit on Thursday. Link this Share this Digg this Email Reprints

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