FOREX-Euro tests $1.28 as China, Basel, lift risk mood

* Euro surges, lack of surprise in Basel III, China data help

* Aussie at 4-mth high,kiwi 1-mth peak as China data supports

By Charlotte Cooper

TOKYO, Sept 13 (BestGrowthStock) – The euro surged on Monday as
positive market sentiment following upbeat Chinese data and a
lack of surprises from new banking rules tripped automatic buy
orders and sent it 1 percent higher against the dollar.

The upbeat economic numbers out of China also propelled the
Australian dollar to its highest in four months against the
greenback as share markets around Asia rose on positive risk
sentiment and the low-yielding yen retreated.

Automatic buy orders triggered at around $1.2720/30 and
$1.2750/70 helped extend the euro’s rally, with talk of buying by
a commodity trading adviser early on also said to have helped the
rise. It peaked at $1.2809 (EUR=: ) before retreating to $1.2800.

Analysts said the positive sentiment for the euro could last
for a while but they wanted to see how European financial shares
and credit markets responded.

“The introduction of the new Basel rules is years away, so
the market’s focus will soon shift back to more immediate factors
such as euro zone debt auctions and suspicions on the EU stress
test,” said Keiji Matsumoto, a strategist at Nikko Cordial
Securities.

The euro has been in a broad downtrend against the dollar
this year on concerns about sovereign debt and the European
banking system. It corrected from a four-year low below $1.19 set
in June and is now holding above its 100-day moving average of
$1.2652, which has tended to act as a trendline.

It now has resistance from its 55-day moving average at
$1.2815 and has moved above the 20-day moving average in its
Bollinger bands, giving scope to the upper band at $1.2915.

It gained 0.8 percent to 107.60 yen (EURJPY=R: ).

New Basel rules agreed on Sunday will require banks to hold
top-quality capital totalling 7 percent of their risk-bearing
assets, which is up from 2 percent under current rules.

The regulations give banks longer than expected to comply and
Germany won a key concession for its savings and cooperative
banks — both factors supporting markets. [ID:nLDE68B0BP]
[ID:nLDE68B0HV]

RISK ON, YEN OFF

Data at the weekend showed Chinese factories ramped up
production in August and money growth topped expectations,
indicating the economy remained buoyant despite government
efforts to clamp down on bank lending and property speculation.

While inflation rose to its fastest pace in 22 months, the
rate of 3.5 percent was in line with expectations. Some rumours
had circulated ahead of the weekend that China might tighten
policy but the data generally painted a picture of an economy
gliding in for a soft landing. [ID:nTOE68A00H]

“There’s a general risk-on move as relatively benign Chinese
data over the weekend and a lack of policy tightening, which had
been rumoured, are all encouraging risk,” said John Horner, a
foreign exchange strategist at Deutsche Bank in Sydney.

That helped the New Zealand dollar (NZD=D4: ) gain and sent the
Australian dollar up as far as $0.9320 (AUD=D4: ), its highest
since late April, before it came back to stand 0.5 percent up on
the day at $0.9305.

The Aussie now faces resistance from April highs of $0.9325
and $0.9389 and then its 2009 peak at $0.9407.

“If the Aussie breaks above its high since Lehman’s collapse
of around $0.94 that could send a strong bullish signal on the
currency,” a Japanese bank trader said.

It also gained to 78.51 yen (AUDJPY=R: ), its highest for a
month and above its 100-day moving average at 78.00 yen.

The yen was on the back foot across the board with the dollar
holding off a recent 15-year low of 83.34 yen to stand at 84.12
yen (JPY=: ) on Monday, following a rise in U.S. Treasury yields.

Data from the Commodity Futures Trading Commission showed
currency speculators slightly raised their net long yen position
in the week ending Sept. 7, just before the yen’s latest 15-year
high. They also raised their net long position in the Australian
dollar. See [ID:nN10229952]
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ PDF presentation on the yen: http://r.reuters.com/mam52p PDF on Japan leadership vote: http://r.reuters.com/vyk92p ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Japan’s ruling party holds a leadership election on Tuesday
in which Prime Minister Naoto Kan is being challenged by
powerbroker Ichiro Ozawa in what is expected to be a close vote.

One trader said political risk was weighing on the yen, and a
Reuters poll shows financial markets expect that a win by Ozawa,
who has said Japan should intervene to curb yen gains, would put
downward pressure on the yen in the short term. [ID:nTOE68C00Z]

Tohru Sasaki, chief FX strategist Japan at JP Morgan Chase,
said some investors expected yen selling intervention after or
even before Tuesday’s vote.

“My main scenario is no intervention, but the market may try
to speculate on that possibility, and in the next few days the
yen may be under downward pressure,” Sasaki said.
(Additional reporting by FX analyst Rick Lloyd in Singapore and
Hideyuki Sano in Tokyo; Editing by Michael Watson)

FOREX-Euro tests $1.28 as China, Basel, lift risk mood