FOREX-Commodity currencies cheer China PMI, sterling shines

Mon Dec 2, 2013 12:20am EST

Related Topics

* China PMI steady at 51.4 in Nov vs expected reading of 51.1

* Aussie and kiwi both firmer in reaction to China data

* Sterling shines on expectations of early BoE tightening

* Yen still vulnerable after big fall last month

* Euro supported after positive inflation and jobs data

By Ian Chua and Hideyuki Sano

SYDNEY/TOKYO, Dec 2 (Reuters) - Commodity currencies gained sharply on Monday following positive data from China while the British pound soared on expectations of early policy tightening by the Bank of England.

Investors bought the Australian and New Zealand dollars after a survey on Sunday showed China's factory growth held at an 18-month high in November, an outcome that was slightly ahead of expectations. Both Australia and New Zealand are highly leveraged to China's economic cycle.

Sentiment was buoyed further after a similar Chinese private manufacturing survey published on Monday was revised up from preliminary reading.

The Aussie rose 0.5 percent to $0.9150 and the kiwi advanced 0.9 percent to $0.8195.

Sterling jumped to a two-year high of $1.6443, retaining its strength in recent weeks on the back of solid UK economic data and expectations that the Bank of England could raise rates earlier than most other major central banks.

The pound also hit a 10-1/2-month high against the euro at 82.75 pence and a five-year high of 168.55 yen.

By contrast, the Japanese currency continued to struggle after slumping more than 4 percent in November against the dollar and euro.

Investors have been selling the low-yielding yen to buy riskier assets in carry trades made attractive by the Bank of Japan's ultra-loose monetary policy.

BOJ Governor Haruhiko Kuroda said on Monday that he would not hesitate to adjust policy, fanning speculation the bank could take more easing steps next year.

The dollar scaled a six-month high of 102.65 yen early on Monday, though it later dipped on profit-taking following news that one of the key architects of Japan's aggressive stimulus, Economics Minister Akira Amari, was hospitalised.

The greenback last stood at 102.32 yen, while the euro was at 139.20 yen, near a five-year high of 139.705 hit on Friday.

EURO SUPPORTED

The euro was supported after Friday's euro zone inflation and employment data dented speculation over further monetary easing by the European Central Bank.

"It is becoming a consensus that the ECB will not take any action this week. I guess the euro will also likely be supported by repatriation flows ahead of the year-end," said Takahiro Suzuki, vice president of forex at Nomura Securities.

But some traders suspect euro/yen could take a breather in the lead-up to the ECB policy meeting on Thursday, where investors will be scouring for clues to the central bank's next policy step.

"The focal point will be the ECB forecasts for HICP inflation in 2014 and 2015," analysts at BNP Paribas wrote in a note to clients, referring to EU-harmonised consumer prices.

"The profile of inflation will dictate how the euro reacts this week. The softer the forecast, we would expect euro to remain increasingly under pressure."

Against the dollar, the euro was little changed at $1.3601 , not far from Friday's one-month high of $1.3622.

It was struggling to find enough momentum to break above chart resistance at $1.3623, the 61.8 percent retracement level of its late October to early November slump.

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