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Kiwi Takes <?xml:namespace prefix = st1 ns = "urn:schemas-microsoft-com:office:smarttags" />Hit On China Reserve Hike

The Kiwi was held in a tight range overnight with no real fluctuations to boost the commodity bloc partner out of the longer term depression witnessed over the past couple of weeks.  However, economic data was on the side of Kiwi traders, as manufacturing activity rose 1 percent in the month.  Posting similar results as the prior ANZ PMI report seen the previous day, the figure did little on the session as most of the market stood waiting for the US current account and University of Michigan, both of which turned out to be better than expected.  Narrowing in the month, the US current account seems to have calmed some fears following the pessimistic plunge witnessed in the TIC data just a short time ago.  However, the rumored real spark of further selling came from the expected announcement of a reserve rate increase by the Peoples Bank of China.  Boosting the reserve requirement higher by 50 basis points, policy officials are attempting to curb inflationary pressures and abnormal fixed income asset demand.  As a result, commodity bloc currencies took a major hit on the day with all three widely seen as growth prone, given their interest rates.  Separately, cross AUDNZD rumored buying by a US investment house has also propped up the major leaving traders to look forward to next weeks gross domestic product release.

EURCAD

Euro Rallies Higher Following Data Dip

Compared against the falling Canadian leg, the market bid the euro counter higher even as industrial production fell 0.6 percent.  The report wouldnt have been notable except for the fact that the actual depicted a gloomier picture versus expectations of an increase of 0.4 percent in the month.  Nonetheless, with interest rates likely to rise in the Euro zone on yesterdays consumer price index report, investors sided with the euro against a lagging loonie.  Heading into the weekend close, bids are seen as low as 1.2605 with stops just at and below the even figure.  Comparatively, selling pressure looks to emerge near session highs of 1.2695 and the 1.2700 handle with stops keeping any gaining momentum at bay above.  Next weeks data includes German producer prices early in the week with the trade balance garnering minimal attention.

USDCAD

Traders Favor Dollar On Data

Dollar demand trumped recently stronger Canadian dollar speculation even as crude oil regained some strength on the session.  Oil contracts traded higher to close at $70.20 amid mixed reactions from Iranian officials over the submitted European and US package, sparking concerns of standstill and shortened supply.  Fears are also mounting as we head into the summer season, with hurricanes just around the corner hovering over the Gulf of Mexico.  Nonetheless, the Canadian dollar seemed weighed down by the same handful of events that pressed the Aussie lower in the North American session.  Coupled with positive American data, University of Michigan and current account reports, traders bid the US single counter higher as the Peoples Bank of China raised the reserve requirement by 50 basis points.  Further downside may resume next week in the major pair as plenty of Canadian data starts the week off right.  First up will be international securities transactions with consumer prices not too far behind on Tuesday. Although slowing slightly, expectations are for both surveys to keep traders bidding on the favor for the bloc partner.