* CAD, AUD, NZD outperform G3 peers after upbeat China PMI
* USD, EUR and JPY still searching for inspiration
* Japan to announce more 'Third Arrow' policies
(Adds details, quotes)
By Ian Chua and Shinichi Saoshiro
SYDNEY/TOKYO, June 24 The dollar-bloc currencies
held onto gains on Tuesday, having outperformed their G3 peers
on optimism about Chinese growth.
Given the absence of catalysts in early Asian trading,
markets looked to the Japanese government to deliver its latest
instalment of long-term economic policies later in the day.
The Canadian dollar traded at C$1.0725, not far
from a 5-1/2 month peak of C$1.0717 per U.S. dollar. Both the
Australian and New Zealand dollars were at $0.9424 and
$0.8711, having hit multi-week highs of $0.9445 and
$0.8749 on Monday.
All three currencies had risen after a closely watched
survey on Monday showed activity in China's factory sector
expanded in June for the first time in six months as new orders
Gains in the Canadian dollar followed Friday's rally sparked
by upside surprises in local inflation and retail sales data.
"Our proprietary positioning indicator is suggesting market
has flipped to a long CAD bias for the first time since early
2013," BNP Paribas analysts wrote in a note to clients.
"Given the scope for a less dovish Bank of Canada
announcement and Monetary Policy Report next month, we see scope
for further CAD gains, particularly against EUR and AUD."
In contrast, the G3 currencies were stuck in familiar ranges
with investors discounting the latest readings on euro zone,
U.S. and Japanese manufacturing activity given the dovish stance
taken by all three major central banks.
The euro was last at $1.3598, having traded on either
side of $1.3600 in the past few sessions. Against the yen, the
common currency stood at 138.54, while the dollar
That left the dollar index little changed at 80.286,
well within 80.000-81.000 seen since May.
Japanese Prime Minister Shinzo Abe will on Tuesday detail
his so-called "Third Arrow" policies including phased corporate
tax cuts, reforms for the $1.26 trillion Government Pension
Investment Fund (GPIF) -the world's biggest pension fund- and
proposed dance hall deregulation.
Given that many have already been leaked or announced by
officials, the risk is that the measures are likely to receive a
lukewarm response from investors. Still, the market will be keen
to see how they are fleshed out and implemented.
"Much of the attention, particularly from foreign investors,
is on GPIF reform," said Shinichiro Kadota, chief Japan FX
strategist at Barclays Bank in Tokyo.
"But judging from what the GPIF has been implying so far,
portfolio allocation details are not expected to be revealed
until August or even October, so any market reaction today is
likely to be limited," he said.
Abe's government is pushing GPIF to buy more stocks and
invest less in government bonds, which is expected to have
repercussions on financial markets given the fund's size.
Elsewhere, the market awaited Bank of England Governor Mark
Carney's appearance at a parliamentary committee later in the
session, which could be a potential driver of sterling.
Of particular interest for traders is whether Carney would
provide further hints of an early rate hike, after the governor
suggested as much earlier in the month and set sterling on
course for a near six-year peak versus the dollar.
The pound traded at $1.7023 after reaching $1.7064,
its highest since October 2008.
(Editing by Shri Navaratnam)