SYDNEY/SINGAPORE: The safe-haven yen eased on Monday, while the Australian dollar jumped after surprisingly strong Chinese factory activity data eased fears about a hard landing in the world's second biggest economy.
The Australian dollar rose 0.5 percent to $1.0400 having peaked at $1.0470 after a report on Sunday showed activity at big Chinese factories hit an 11-month high in March.
"This is now three months of trend improvement, and is good news for the AUD and commodity currencies in general," said Annette Beacher, head of Asia Pacific research at TDSecurities.
Against the yen, the Aussie climbed to 86.44, pulling well away from last week's trough around 84.60.
Adding to the yen's woes was a weaker-than-expected reading on business sentiment for big Japanese manufacturers, which put the spotlight on whether the Bank of Japan may conduct additional monetary easing as early as next week.
"Personally I don't think that will happen," said a trader for a major Japanese bank in Singapore, on the chances of the BOJ conducting further monetary easing in April.
"But I get a strong sense that there is interest to put on speculative bets, led by offshore players," he said, adding that hedge funds were cited as buyers of the dollar against the yen this morning.
The dollar rose 0.4 percent against the yen from late US trade on Friday to 83.16 yen, pulling away from a three-week low of 81.83 yen hit on Friday on trading platform EBS.
The yen fell broadly, with the euro rising 0.3 percent to 110.94 yen, edging back in the direction of a 4-1/2 month high of 111.43 yen hit on March 21.
Against the dollar, the euro held steady at $1.3339.
JAPAN'S NEW FISCAL YEAR
With Japan's fiscal year-end out of the way, there is now less risk of the yen drawing support from seasonal fund repatriation by Japanese companies, market players say.
"Seasonal factors that have been holding back dollar/yen for the past two weeks or so have been eliminated and it's plain sailing from here on in," said Gareth Berry, associate director of G10 FX strategy for UBS in Singapore.
"At least that's the sort of view from the international investment community," Berry said, adding that UBS was looking for the dollar to rise to 85 yen in three months' time.
Besides the possibility of US Treasury yields heading higher in coming months if optimism about a sustained US economic recovery increases, the BOJ's monetary policy was another factor that may help lift dollar/yen, he said.
The Japanese central bank has two policy meetings planned this month, a two-day meeting on April 9-10 and another gathering on April 27.
"If they decide to keep policy on hold on April 10, they can always choose to ease further on April 27," Berry said. "The BOJ has more meetings than any other G10 central bank, so there's plenty of scope for further easing throughout the rest of this year and perhaps as soon as this month."
In a sign of bearish market sentiment against the yen, a gauge of market positioning shows that currency speculators had ramped up net short positions in the yen to the highest since July 2007 in the week ended March 27.
The yen has been under broad pressure since the Bank of Japan's surprise monetary easing in February, when the central bank expanded an asset-buying scheme by 10 trillion yen and set an inflation goal of 1 percent.
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