FOREX-Euro rises vs dollar; China rate hike hits Aussie

* Aussie dips, then steadies after Chinese rate move

* Euro rebounds again from below 200-day moving average

* Robust Chinese economy should underpin Aussie into 2011

* London holiday, New York blizzard keep trading light
(Adds detail, comment, updates prices)

By Steven C. Johnson

NEW YORK, Dec 27 (BestGrowthStock) – The Australian dollar dipped
briefly on Monday after the Chinese central bank’s weekend
interest rate hike, while the euro rose against the dollar
after breaking above its 200-day moving average.

Trading ranks were extremely thin. London was closed on
Monday and Tuesday for holidays and a blizzard in New York
limited activity, ensuring only minor price fluctuations.

The Australian currency was the biggest mover out of the
gate, falling as low as $0.9987 after China’s Christmas Day
interest rate hike on Saturday, though it had clawed back to
$1.0020 (AUD=: ) early in New York, down 0.1 percent. The
currency hit a six-week high of $1.0067 last week.

The euro managed to rise after falling below its 200-day
moving average, a drop that is usually indicative of more
losses.

While fears that a euro zone debt crisis could spread have
pushed the euro below the 200-day moving average –$1.3087,
according to Reuters data — in five of the last six sessions,
it has rebounded swiftly each time. It was last up 0.2 percent
at $1.3146 (EUR=: ).

“With no economic news, we’re focusing on these technical
factors, and that push above the 200-day average has been a
catalyst for the euro,” said Omer Esiner, strategist at
Commonwealth Foreign Exchange in Washington. “And with London
off and the blizzard in New York, things are very subdued.”

The euro hit a three-week low of $1.3055 last week, and its
outlook is still clouded by Spain and Portugal, which investors
fear may have trouble refinancing their debt in the new year.

HIGHER CHINESE RATES

Australia’s economy has benefited from strong Chinese
demand, and markets fear China’s attempts to dampen inflation
with higher interest rates could hurt domestic Chinese demand.

But traders said earlier Australian dollar losses had more
to do with the timing of the hike, than the move itself.

“There was a knee-jerk sell-off in the Aussie but investors
knew this China move was coming eventually,” said Geoffrey Yu,
currency strategist at UBS. “Providing Chinese data holds up in
2011, the Aussie should stay supported.”

Danske Bank analysts said they expect three more Chinese
rate hikes in 2011, with all likely coming in the first half.

TRADING THE YEN

The dollar was flat at 82.88 yen

“A sharp rise in U.S. bond yields earlier this month has
prompted many traders to bet on a rise in the dollar. But as
the dollar was unable to extend gains, traders have been
cutting long positions,” said Katsunori Kitakura, chief dealer
at Chuo Mitsui Trust Bank.

A correlation between the exchange rate and U.S. yields
started to weaken this month, with he dollar shedding 1 yen
last week even as the two-year Treasury yield rose by 5 basis
points. But traders blamed illiquid, year-end conditions.

UBS said gross trading flows involving the yen were less
than 30 percent of typical weekly volume last week, though
“what little we did see was heavily biased toward buyers.” That
pushed the bank’s clients “a little deeper into net long yen
territory, but these positions are still quite shallow.”

An auction of $35 billion in two-year U.S. Treasuries later
on Monday will be watched closely.
(Additional reporting by Neal Armstrong in London and Hikeyuki
Sano in Tokyo; Editing by Leslie Adler)

FOREX-Euro rises vs dollar; China rate hike hits Aussie