Foreign exchange investors were in the mood to take on risk on Monday, driving the dollar and yen lower amid speculation over strong Chinese data this week.
Both currencies have resumed their negative correlation with equity markets since the start of the year. Higher equities have indicated a stronger appetite for risk and benefited strategies such as the carry trade, which favour high-yielding currencies, including the Australian and New Zealand dollars and emerging market units, funded by borrowings in the low yielding dollar or yen.
“On balance the overall tone has been just about positive, with firmer economic data, most notably in China outweighing sovereign debt concerns in Greece and elsewhere in Europe,” said Mitul Kotecha at Calyon.
“The ‘risk on’ tone is likely to have a stronger hand later in the week, driven in large part by strong Chinese data.”
Most eagerly awaited is China’s fourth-quarter gross domestic product, which is published on Wednesday, and is expected to have advanced into double figures after the third-quarter data showed annual growth of 8.9 per cent.
With US markets closed for a public holiday, equity markets in Europe pushed higher. This helped the Australian dollar, up 0.7 per cent versus the US dollar at $0.9266, and 0.6 per cent higher to the yen at Y84.07.
Tuesday, January 19, 2010
Dollar and yen lower amid risk-taking
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