* Funding currencies drop as global stocks push higher
* Australian and New Zealand dollars outperform on China
* Easy money, low rates pledge buoy risk sentiment
By Laurence Fletcher
LONDON, Nov 18 Higher-yielding currencies such
as the Australian and New Zealand dollars rose against the U.S.
dollar and yen on Monday, boosted by buoyant stock markets as
investors cheered China's economic reform plans.
Chinese shares posted their biggest gain in more
than two months on Monday, as Beijing announced its most
sweeping economic and social reforms in nearly three decades.
Global shares hit their highest levels since the start of 2008
"Currencies linked to China will receive some support ...
although this is not an outright risk-on environment," said Ian
Stannard, head of European currency strategy at Morgan Stanley,
although he said a rebalancing of the Chinese economy could be a
negative for the Australian dollar in the longer term.
The Australian dollar was up 0.4 percent versus the
U.S. dollar at $0.9402, while the New Zealand dollar
was similarly up at $0.8373. Both also rose against the yen
Both currencies, which also rose on Friday, tend to perform
well when investors are prepared to take on more risk or on
better prospects for Chinese growth.
In contrast, the dollar, yen and euro - which offer
investors lower yields - were more concerned with the debate
over how long central banks will keep monetary stimulus easy.
"Funding currencies, such as dollar, yen and the Swiss franc
are soft as investors look for value and yield," said Tom
Levinson, currency strategist at ING.
The dollar came off highs last week as the Federal Reserve's
chief-in-waiting encouraged faith it would keep it
$85-billion-a-month bond purchases intact this year. Most
investors now expect the Fed to start paring stimulus only in
March 2014, meaning there will be more dollars flushing around.
The European Central Bank has also pledged to keep rates
near record lows and may yet take more action while the Bank of
Japan is also set to be aggressive in providing monetary
stimulus to reach its inflation goal. The BOJ will hold a
regular policy meeting this week and is expected to maintain its
The dollar index was down 0.2 percent at 80.709 as
some investors trimmed long dollar positions. The dollar was
down 0.1 percent at 100.08 yen, while the euro was
marginally up at 135.26 yen. The euro was up 0.1
percent against the dollar at $1.3515.
The euro received some support after data showed the euro
zone's trade surplus grew more than expected in September.
Morgan Stanley's Stannard also pointed to reform plans for
Japanese pension funds, which could weaken the yen.
"The suggestions ... are that we could see some
diversification out of JGBs (government bonds) and into
higher-risk assets, and allocations overseas, which should put
pressure on the yen," he said.
Investors are keeping a close eye on coming U.S. data to
gauge the timing of any tapering of the Fed's bond-buying.
A key piece on data, due on Wednesday, is October retail
sales. Data on Friday showed currency speculators added to more
favourable bets in the dollar and turned even more negative on
the yen in the week ended Nov. 12.