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China Reforms Support Commodity-linked Currencies

11/18/2013 | 07:06am US/Eastern
   By Clare Connaghan 

The Australian and New Zealand dollar firmed against the U.S. dollar Monday as economic reforms announced by China's leadership supported the commodity-linked currencies.

China's leaders outlined a broad restructuring of the economy, saying it would open the financial sector and relax restrictions on investment. The announcements helped the Australian dollar rise to $0.9421 against the buck Monday, its strongest level since Nov. 8, while the New Zealand notched up gains of around 0.6% against the greenback.

"Markets continue to interpret the reforms announced by Beijing last week as positive as Chinese stocks and both the Australian and New Zealand [dollars] continue to perform well," said currency strategists at BNP Paribas.

More broadly, the U.S. dollar was under mild pressure Monday, falling as low as Y99.78 against the yen, while the pound rose to a three-week high of $1.6147 against the dollar before losing ground.

"Federal Reserve Chair-elect Janet Yellen's dovish tone at last week's testimony before the Senate Banking Committee is still weighing modestly upon the U.S. dollar," said Lee Hardman, a currency analyst at Bank of Tokyo-Mitsubishi UFJ in London.

Ms. Yellen, the White House's nominee to run the Fed, said the U.S. economy still needs support from the central bank as it continues to mend, comments which have raised uncertainty about when stimulus measures will be removed by the Fed.

"The market is totally obsessed about the timing of Fed tapering," said Jane Foley, a G10 currency strategist at Rabobank in London.

Against this backdrop, speeches from New York President William Dudley, at 1715 GMT, and Philadelphia President Charles Plosser, at 1830 GMT, will be closely watched for further hints on the timing of any scaling back of the central bank's $85 billion-a-month asset purchases.

Later in the week, the Federal Open Market Committee's October minutes, published Wednesday, will be scrutinized.

Forex spot:       EUR/USD    USD/JPY    GBP/USD    AUD/USD    WSJ Dollar Index 
Spot 1129 GMT     1.3512     100.09     1.6111     0.9402          73.15 
NY Close          1.3495     100.18     1.6115     0.9369          73.24 
(Previous Day) 

Write to Clare Connaghan at clare.connaghan@wsj.com

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