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Reuters Australia
Aussie dollar off lows on fund buying; bonds rise
Tuesday October 27, 07:08 PM
* Aussie pares sharp losses on buying by funds
* Profit taking hurts high-yielders
* Caution ahead of data in U.S. and CPI data at home
By Anirban Nag
SYDNEY, Oct 27 (Reuters) - The Australian dollar stayed well below recent 14-month peaks on Tuesday, hurt by profit taking in long positions by investors, although buying by funds and others at dips checked a sharper decline.
The Aussie was at $0.9182, recovering from a low of $0.9125 but still down from $0.9235 seen late here on Monday. It had struck a 14-month high of $0.9330 late last week. It eased to 84.55 yen AUDJPY=R from 84.71 yen late on Monday, with support strong around 84 yen.
"There were a lot of buyers waiting at the dips which saw the Aussie recover," said Anthony Gray, head of the risk solutions department at Travelex.
Other traders cited buying by investors such as hedge funds, while talk swirled that Asian central banks were also bidding for the Aussie.
Investors are likely to stay wary ahead of U.S. consumer confidence numbers for October and house price index data for August, both due later in the day and third-quarter U.S. gross domestic product (GDP) data due on Thursday.
Analysts expect the U.S. economy to expand 3.3 percent in the third quarter [ECONUS]. Anything lower could trigger another wave of selling in riskier assets, as happened with the shock GDP numbers from the UK late last week.
In Australia, all eyes are on the third-quarter consumer price index numbers due at 0030 GMT on Wednesday. The numbers have assumed significance after recent Reserve Bank of Australia (RBA) commentary turned towards inflation from supporting growth.
Implied cash rates, based on money market and swap rates CSRBA=CSAU, are fully pricing in a 25 basis point hike and factoring in around a 25 percent chance the central bank will raise rates by 50 basis points on Nov. 3.
Gray also said that short covering in the U.S. dollar still had a bit to run.
The U.S. dollar, seen as a safe haven when doubts about a global recovery emerge, held on to gains against a basket of currencies .DXY =USD. That index had posted its best daily gain since September on Monday, pulling further away from a 14-month low of 74.94 on Oct. 21.
Data late last week showed currency speculators increased their bets against the U.S. dollar in the week to Oct. 20, with the value of net short positions rising to $18.65 billion from $17.99 billion a week earlier. [IMM/FX].
Australian bond futures rose amid doubts on whether the central bank will opt for a 50 basis point hike next month. Three-year futures YTTc1 were 0.04 points higher at 94.61 while the 10-year contract YTCc1 was 0.03 points up at 94.285.
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