China reopening hopes lift risk sentiment ahead of Fed minutes

SINGAPORE : The euro steadied on Wednesday and riskier currencies bounced, lifted by optimism that China's eventual emergence from COVID restrictions helps growth, while investor focus turned to U.S. data and the Federal Reserve.

The euro had lost 1 per cent overnight, its sharpest drop in more than two months, following a larger-than-expected drop in German inflation, but it edged up from three-week lows to $1.0570 in Asia trade.

The trade-and-China sensitive Australian dollar rose 1 per cent to $0.6800, recouping its overnight losses, while the yuan gained 0.4 per cent to 6.8913 per dollar - creeping back toward Tuesday's four-month peak.

State media in China pledged a "final victory" over the epidemic, boosting market bets that China's relaxation of rules and reopening was irreversible. Talk of support for the housing sector also helped the mood in stock markets.

The Thai baht has scaled six-month highs on expectations its economy will gain from improved tourism as China drops quarantine for travellers and the Singapore dollar hit an 18-month high on Tuesday.

Larger moves were capped in the still holiday-thinned Asia session by looming economic data in the United States and the release of minutes from last month's Federal Reserve meeting. "We're back in to some A-league economic data, so maybe we'll get some more fundamentally-driven price action out of that," said National Australia Bank's head of FX strategy, Ray Attrill, in Sydney.

The yen was 0.1 per cent stronger at 130.83 per dollar.

The U.S. dollar index rose 1 per cent on Tuesday to 104.73, mostly due to the euro's drop, and it eased a little on Wednesday to 104.57. Sterling hovered at $1.1973 and the kiwi nudged 0.4 per cent higher to $0.6273.

Headline German CPI fell to an annual 8.6 per cent in December, from 10 per cent the previous month, against expectations for 9.1 per cent, data on Tuesday showed, knocking the euro and rallying bunds.

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Currency bid prices at 0642 GMT

Description RIC Last U.S. Close Pct Change YTD Pct High Bid Low Bid

Previous Change

Session

Euro/Dollar

$1.0560 $1.0549 +0.10 per cent +0.00 per cent +1.0578 +1.0541

Dollar/Yen

130.8550 131.0200 -0.20 per cent +0.00 per cent +131.4150 +130.6850

Euro/Yen

138.18 138.18 +0.00 per cent +0.00 per cent +138.5600 +138.0300

Dollar/Swiss

0.9337 0.9359 -0.23 per cent +0.00 per cent +0.9366 +0.9325

Sterling/Dollar

1.1972 1.1968 +0.05 per cent +0.00 per cent +1.2000 +1.1960

Dollar/Canadian

1.3657 1.3670 -0.14 per cent +0.00 per cent +1.3680 +1.3627

Aussie/Dollar

0.6792 0.6727 +0.98 per cent +0.00 per cent +0.6817 +0.6718

NZ

Dollar/Dollar 0.6268 0.6248 +0.41 per cent +0.00 per cent +0.6283 +0.6245

All spots

Tokyo spots

Europe spots

Volatilities

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