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FOREX-Commodity currencies make the running on China hopes

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FOREX-Commodity currencies make the running on China hopes

Thu Sep 9, 2010 8:42pm EDT

* Growth currencies in demand before China data

* Dollar creeps above 84 yen, aided by rising yields

SYDNEY, Sept 10 (Reuters) - Commodity currencies hovered near recent highs on Friday, while the majors languished, as investors hoped for another bumper China trade data that would show the world's second-biggest economy is still growing at a solid clip. With Asian bourses likely to mirror the overnight bounce in U.S. stocks after encouraging U.S. data [ID:nN09174403], demand for riskier assets found further support at the margins.

"Currency markets reflected a mild return of risk appetites, with commodity and cyclical currencies riding the wave," said Matthew Strauss, a strategist at RBC Capital Markets.

The market expects China to show on Friday that its exports leapt 35 percent in August from a year ago, while its imports grew by over a quarter. [ID:nSGE6820DG]

If that is so, it would bode well for commodity currencies at the expense of traditional safe havens such as the U.S. dollar and yen as it means China's voracious demand for resources was still intact.

Optimism over China's growth prospects helped the Australian dollar AUD=D4 to hold near a four-month peak at $0.9227, with resistance along a weekly trendline at $0.9280. The Aussie has also made lifetime highs on the euro for three days running.

Likewise, the Canadian dollar CAD=D4 was firm at C$1.0335, and the New Zealand dollar NZD=D4 in sight of a one-month high at $0.7046.

Yet, in a sign the market's mood could swing abrubtly, as it has tended to this year, the dollar stayed in sight of a 15-year low against the yen JPY=, albeit a shade firmer at 83.91.

Speculation about whether Tokyo would intervene to curb the strong yen and shield Japanese exporters took a back seat in early trade, although minutes to the Bank of Japan's August policy meeting showed it had its eyes on the yen. [ID:nSGE6820DG]

The dollar had hit a 15-year trough of 83.34 yen on the trading platform EBS on Wednesday.

Traders in Tokyo said stop-loss buy orders were seen at 84 yen, and that the dollar should get reprieve against the yen on Friday as Japanese importers were buying the U.S. currency.

Westpac, for one, agreed the dollar was a good buy against the yen at present levels because U.S. and Japanese rate differentials had shifted in the U.S. dollar's favour.

"The 10-year U.S. yield has pushed above the downtrend resistance line in place since early April," Westpac said.

But it advised investors to buy the U.S. dollar against the yen through a call option with a strike price at 85 yen, instead of trading the currencies outright as it feared a sudden turn in risk appetites.

The marginally weaker yen helped the euro to edge up to 106.64 yen EURJPY=R, but still in sight of a nine-year low of 105.41 struck in late August.

The euro EUR=, which was recently pummelled after traders seized on resurging fears about Europe's fiscal health as an excuse to sell the common currency, was a touch softer on the U.S. dollar at $1.2682.

Charts suggested the euro should find support around its 100-day moving average of $1.2658. (Additional reporting by Hideyuki Sano) (Reporting by Koh Gui Qing)

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