* Major currencies mark time before Chinese economic data
* China Q2 GDP seen at 7.5 pct, mkt braced for downside risk
* Australian dollar most vulnerable to disappointment
By Wayne Cole
SYDNEY, July 15 The U.S. dollar was marking time
early Monday as investors tensed for key Chinese economic data
that could well set the near term course for Asian currencies
and the Australian dollar.
The U.S. dollar was idling at $1.3060 per euro,
little changed from $1.3066 late in New York on Friday. It was a
shade softer on the yen at 99.22, but steady against a
basket of major currencies at 82.978. Trading was thin
with Japan on holiday.
Uncertainty abounded before Chinese figures on gross
domestic product (GDP), retail sales, industrial output and
urban investment, amid fears the economy could be slowing faster
A Reuters poll of economists projected China's economy grew
7.5 percent in the second quarter from a year earlier, slowing
from 7.7 percent in the first.
Markets were spooked last week when China's finance minister
was reported as saying growth could be 7 percent this year,
below the official target of 7.5 percent.
However, the official Xinhua News Agency later corrected
that report to quote Minister Lou Jiwei as saying: "There is no
doubt that China can achieve this year's growth target of 7.5
"The market's priced in a lot of bad news now, so a figure
around 7.5 percent could actually provoke a relief rally," said
a trader at an Australian bank in Sydney.
"Our economists think the other numbers, like retail sales,
will come out on the upside of expectations, which could help as
well. The Aussie could sure use it."
The unease over China took a heavy toll on the Australian
dollar on Friday, briefly knocking it under 90 U.S. cents for
the first time since September 2010. Not only is China
Australia's biggest export market but the Aussie is often sold
as a liquid proxy to hedge any weakness there.
On Monday, the Aussie had steadied somewhat at $0.9073
but looks likely to be plagued by uncertainty for some
time given Beijing's apparent preference for reform over
Another source of market angst has been the Federal
Reserve's on-again off-again plans to start slowing its asset
buying in coming months. Fed Chairman Ben Bernanke gets another
chance to clarify the outlook in testimony to Congress on
Wednesday and Thursday.
Bernanke sent the dollar reeling last week when accenting
the dovish side of policy, while playing down the strength of
recent payrolls data and warning that the Fed would push back if
financial markets tightened prematurely.
"Having been shocked once, the FX market will be cautious in
rebuilding substantial long USD exposure before the Bernanke
testimonies," said Alan Ruskin, global head of foreign exchange
strategy at Deutsche Bank in New York.
"The pre-tapering price action may become more choppy, but
he is unlikely to change a perception that the Fed is separating
itself from other central banks in shifting toward a less
This "separation" of U.S. monetary policy is why much of the
market is bullish on the dollar longer term, and why investors
had been piling up long positions.
The value of net long positions rose to $27.94 billion in
the week ended July 9, doubling in value since late June,
according to the Commodity Futures Trading Commission.
Some of those, however, would have been cleared out in the
wild swings following Bernanke's comments last week.