Risk-sensitive currencies perked

LONDON (Reuters) – FX Signals – Risk-sensitive currencies such as the Australian dollar and Chinese yuan jumped and the safe-haven yen eased slightly on Wednesday after Chinese property giant Evergrande said it would make an upcoming yuan bond coupon payment, allaying immediate fears of a default.

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Some of the excitement fizzled, however, after traders realised it was still not known whether the developer would be able to pay the coupon on its offshore dollar bonds, due on Thursday.

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The yen weakened about 0.2% to 109.43 to the dollar, showing little reaction to the Bank of Japan’s decision to keep policy on hold.

“Risk assets are navigating calmer waters this morning, as the reopening of Chinese markets after a four-day holiday saw the People’s Bank of China pump extra liquidity into the banking system through reverse repurchase agreements,” ING said in a note to clients.

“Also contributing to limiting losses in Chinese equities was the news that Evergrande has negotiated an interest payment for its 5.8% 2025 bond due tomorrow. As a consequence, U.S. stock futures are pointing at a positive open, and the FX market saw a dominance of risk-on moves with commodity currencies gaining against safe-havens this morning.”

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The dollar index stood at 93.226 in early London trade, staying not far off Monday’s one-month high of 93.455.

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The euro hardly budged at $1.1725, having stabilised at a one-month low of $1.1700 on Monday.

The Chinese yuan was fairly stable, firming slightly to 6.4748 per dollar in offshore trade, edging back from one-month low of 6.4878 set on Monday.

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There are rising expectations the central bank will signal plans to start reducing its massive bond purchases in November if incoming data holds up.

10-year U.S. Treasury yields traded at 1.3260%, within recent ranges.

Elsewhere, the Canadian dollar stood little changed, having pared gains made on Tuesday after Prime Minister Justin Trudeau’s Liberals won a tightly-contested election.

Cryptocurrencies bounced back a tad after plunges in the previous session.

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Bitcoin rose 5% to $42,754 after having hit a 1-1/2-month low of $39,573.

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