Australian market China hike in Thin rate dips

By Hideyuki Sano

TOKYO (Reuters) - 27 December The Australian dollar plunged Monday after the Chinese Central Bank raised rates at week's end, and some analysts say clamping chance more China could push investors to sell the Aussie after end of year celebrations.

The yen has also reached a week three high against the dollar, while thin trading conditions are likely to have exaggerated price moves.

While market expected from Beijing to tighten again, the time was a surprise that it had had doubts whether it would raise rates before the end of the year.

Last Saturday by the Chinese Central Bank to raise interest rates is the second in little more than two months, emphasizing his desire to dampen domestic demand and obtain the pressures on prices under control.

The Australia has benefited from the strong Chinese demand for iron ore and other products.

The news hit the Australian dollar as low as $0.9987 in thin trade, erratic, with many of the financial centers of the region on holiday, including Hong Kong and Sydney.

Currency later recovered some of its losses to trade at $1.0035, down 0.2% to about $1.0053 late Friday and a maximum of six weeks from $1.0067 Eve.

"China seems set to strengthen its policy more next year, which will have a negative impact on solid economic links of the Australian Australia given from China." "After many investors return vacation next week they could start the year by selling the Aussie," says Yuki Sakasai, Barclays Capital currency strategist.

While the Australia relatively good financial situation, its growth and higher yields are likely to attract investors, the Australian may be under pressure, particularly against other currencies of the raw materials such as the Canadian dollar, said Sakasai.

But other traders saw a plunge in the Aussie only as a good opportunity to hunt in the negotiation, as is the case since the beginning of 2009.

"I suppose that the market is growing immune to the credit crunch China." Today, the Australian fell just because there are not many players, "said a trader in a Japanese brokerage house."

Thin conditions

Thin trading conditions should persist for the rest of the week for various festivals in many countries. London is closed on Monday and Tuesday, while Tokyo will be closed on Friday.

Receive a minimum of three weeks of yen 82.75 in thin trade dollar slipped slightly against the Japanese yen.

Well stuck in a range of 82.50 84.50 yen, the dollar has been ticking down within two weeks as holders of long positions have renounced hopes to push it beyond of 85 yen.

Means offered by the Japanese exporters keep the dollar check and some traders see these offers potentially weighing on the u.s. currency this week.

"A sharp rise U.S. bond yields more earlier this month following pushed many merchants to bet on a rising dollar." "But, as the dollar was unable to extend gains, traders were cut long positions," said Katsunori Kitakura, head of Chuo Mitsui Trust Bank dealer.

Dollar/yen rate has had a strong correlation with the obligations of U.S., particularly for two years, notes returns but the relationship has weakened this month.

Last week have broken the performance of the U.S. two years rose more than 5 basis points while the dollar dropped 1 yen.

But many traders who ascribe to illiquid year-end market conditions and await the correlation to return when the market players are back from vacation.

The auction of 35 billion dollars in US Treasury bonds two years later in the day will be viewed closely where U.S. bond yields can be directed after a volatile month on the bond market indices.

Support of the dollar is considered around 82.60 yen, its average 55 days, and around 82.40 yen, then at the bottom of a daily ichimoku cloud along the line on the map of ichimoku weekly tenkan.

But the bottom of the cloud is expected to increase gradually later in the week, making it thinner towards the beginning of January and pointing to a higher risk of the dollar falling below the cloud. That would be a major bearish signal.

The euro is ticked up 0.2% to $1.3144, although he had dipped slightly when shot traders successfully for around $ 1.31 stop-loss orders.

The euro seems vulnerable due to concerns about issues debt financing euro area countries, but the absence of many players in the market this week may help the currency believe over three weeks last week low of $1.3055, traders said.

The euro was supported in its 200-day moving average which amounted to $1.3093 Monday.

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