FOREX-Euro and Aussie edge up, China CPI not as bad as feared

Dated Posted: 2011-06-14

* Euro, Aussie up; China CPI 5.5% yr/yr rise less than feared

* Euro near record low vs safe-haven Swissie, 1.200 stops eyed

* Risk currencies gain with equities, U.S. retail sales eyed next

By Ian Chua and Eric Burroughs

TOKYO/SYDNEY, June 14  - The euro edged up across the board on Tuesday after a batch of Chinese economic data calmed some investor worries by showing inflation was not as bad as feared and growth still solid, giving a broad boost to risky assets.

The Australian dollar also gained after the Chinese reports showed industrial production and retail sales posting solid growth. Consumer prices accelerated to a 5.5 percent annual rate in May, slightly higher than the Reuters consensus forecast and the fastest in nearly three years.

Heading into the data releases, market players had fretted that a quicker rise in Chinese inflation would prompt the People's Bank of China to step up its aggressive tightening campaign, adding to the threats facing the slowing global economy.

"The market got caught short. The whisper number for CPI was 6 percent ... so we're seeing a round of short covering on the back of that," said Sue Trinh, senior currency strategist at RBC in Hong Kong.

The euro's intraday rebound took it back above $1.44 to challenge near-term resistance in the $1.4430/50 zone. A clean push through that resistance to the $1.4470/80 area would brighten the single currency's outlook for now, traders said.

The market is now turning its attention to inflation figures in other parts of the world, and most importantly the May data on U.S. retail sales for signs on whether the sudden slowdown in the economy is hampering household spending.

"We've just had some very negative surprises," said a trader at a U.S. bank in Hong Kong. "Unless retail sales are worse than expected, maybe we'll have a nice bounce for equities and cross/yen."

The euro was up slightly from late U.S. trade at $1.4442 , recovering from a session low of $1.43782 on EBS. The single currency was up 0.2 percent at 1.2088 francs and off a session low of 1.2012, coming close to the record low and stop-loss orders seen near the 1.200 level.

The high-yielding Australian dollar was up 0.3 percent at $1.0637 , while the Aussie climbed even more against the yen .

Equities and commodities also took heart from the Chinese data and rebounded thanks to some short-covering. The broad MSCI index of Asia-Pacific shares outside Japan recovered from a three-month low to rise 1.1 percent, while gold and crude oil CLc1 pushed higher.

SAFE-HAVEN SWISSIE

The safe-haven Swiss franc held near a record high against the euro, benefiting from the ongoing European debt crisis and being viewed as one of the few major currencies not suffering from debt troubles or the currency debasement of quantitative easing.

The euro managed to climb against the dollar on Monday even as European policymakers try to sort out their differences, especially German officials and the European Central Bank who have clashed over the prospect of a "voluntary" rollover that may avoid triggering a full debt restructuring.

Talks about a second bailout for Greece are getting closer to conclusion as the European Commission pushes for a voluntary debt swap, media reported, as euro zone finance ministers meet later on Tuesday to finalise the details of a bailout.

Olli Rehn, the European commissioner for economic and monetary affairs, told Sueddeutsche Zeitung in an interview to be published on Tuesday that a solution for the Greek sovereign debt crisis was not as far off as some might think.

On Monday, Standard & Poor's slashed Greece's rating to CCC, making the highly indebted country its lowest-rated in the world.

"The clock is ticking on a solution for the Greek debt crisis," BNP Paribas analysts wrote in a note.

The dollar index , which tracks its performance against a basket of major currencies, dipped to 74.403, off a two-week high of 74.960 struck the previous day.

"Clearly the markets are very concerned about the U.S. economy and the U.S. debt situation itself," said Greg Gibbs, strategist at RBS. "Those are the key factors preventing what would normally be a bigger fallout, given the amount of risk around the European situation."

The dollar drifted up to 80.30 yen and back towards Monday's high of 80.70, stabilising around 80.00/81.00 in the past week.

After a two-day meeting, the Bank of Japan expanded a loan scheme for growth industries as expected, and the move had little impact on markets.

Source: Reuters