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Asian Session – Dollar and aussie surge on strong data

The US dollar surged past 114 yen yesterday as US data continued to surprise on the upside. The ISM manufacturing and the Markit manufacturing PMI both beat expectations in February, raising the likelihood of more rate hikes later this year. The greenback was last trading around 114.20 yen in late Asian session, representing a gain of almost 2% since Monday against the Japanese currency.

The Australian dollar was also boosted after GDP data showed the Australian economy grew more than expected in the fourth quarter of last year. GDP was up 0.6% quarter-on-quarter in the final three months of 2015, beating estimates of 0.4%. The figure was down from the third quarter’s 0.9% rate but quickened to 3.0% on a 12-month basis.

The aussie rallied passed the 0.72 level versus the US dollar after the data to peak at 0.7244, before easing to 0.7228. The New Zealand dollar failed to follow the aussie’s lead after dairy prices remained flat in yesterday’s dairy auction. The kiwi was slightly weaker at 0.6618.

The Japanese yen lost out to the risk-on sentiment and slid versus other majors such as the euro and the pound. The weaker yen boosted shares in Tokyo though which closed up 4% on Wednesday.

Chinese equities also rallied with the main indices up by over 4% despite the rating agency Moody’s downgrading the outlook for Chinese government bonds from ‘stable’ to ‘negative’.

Oil prices fell back from Tuesday’s highs following another jump in US crude inventories according to figures from the American Petroleum Institute. However, both WTI and Brent crude futures managed to hold on to most of their recent gains as investors upped their outlook on the world economy. US oil futures were trading around $34 a barrel on Wednesday.

In European currencies, the euro steadied after hitting one-month lows against the dollar yesterday, edging up to 1.0870 dollars on Wednesday. The pound was also firmer, climbing to 1.3985 dollars.

The rest of the day is likely to be relatively quiet with UK construction PMI and Eurozone producer prices to be the main focus in European session. In the US session, the ADP employment change numbers for February will be eyed ahead of Friday’s nonfarm payrolls data.

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