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FOREX-Euro steady vs USD, caution ahead of China, BoJ
April 10, 2012 / 12:50 AM / 6 years ago

FOREX-Euro steady vs USD, caution ahead of China, BoJ

* Weak China trade data would be major risk for Aussie

* BoJ expected to hold steady but could surprise

* Net short positions in yen still large

By Cecile Lefort

SYDNEY, April 10 (Reuters) - The euro was largely steady against the dollar on Tuesday as the market awaits China’s trade data and an announcement by the Bank of Japan following a two-day monetary policy meeting.

The euro clung to $1.3111, having bounced from a four-week low of $1.30330 hit on Monday but stopped short of resistance around $1.3130.

Overall, risk assets were reasonably resilient as a large number of investors seem to be wagering that soft U.S. payrolls data will bring forward the next round of quantitative easing.

“The market, as always, is holding out hopes that the Fed will do more to boost output if required,” said David Scutt, a trader at Arab Bank Australia.

Earlier on Tuesday, a keenly awaited speech by Federal Reserve Chairman Bern Bernanke proved to be a non-event as he refrained from discussing monetary policy.

Markets, however, will be looking at a raft of other Fed speeches this week for any hint of more easing, which would likely see the U.S. dollar fall to the benefit of risk currencies.

A break of Thursday’s $1.3165 high would see the euro target the top of Ichimoku cloud top at $1.3263.

However, should the Fed signal the bar for further stimulatory policy remains very high, risk assets including the Australian dollar, could be hit hard.

The Australian dollar slipped to a three-month low last week due to soft local data, fears about a hard landing in China and expectations for a cut in domestic rates next month.

Trade figures from China will be a flash point with expectations of a sharp slowdown in annual growth of both exports and imports in March.

Markets have been concerned about a hard landing in China and Monday’s high inflation reading of 3.6 percent certainly dealt a blow to hopes for more stimulus from Beijing.

A weak trade number could see the Aussie plumb fresh lows to as deep as $1.0160, levels not seen since January 9. It was last at $1.0310.

Australia is very sensitive to news out of China, its key export market.

The Bank of Japan’s two-day policy meeting ends later on Tuesday, with an announcement due after 0330 GMT. While it is expected to be holding fire, the market is wary in case it springs another surprise following its easing in February which triggered a broad fall in the yen.

The dollar nudged up 0.2 percent to 81.72, off one-month lows of 81.190 on Monday.

The latest data from the U.S. Commodity Futures Trading Commission shows currency speculators slightly trimmed their net short positions in the yen in the week ended April 3 to 65,108 contracts.

That was still close to the previous week’s 67,622 contracts, which was the biggest net short position in the yen since July 2007.

The dollar index was steady at around 79.740, well off a one-month trough of 78.865 hit last week.

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