Risk-sensitive currencies perked up by Evergrande

London

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.

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.

The Australian dollar rose as much as 0.49 per cent to US$0.7268 before giving up part of the gains to trade at US$0.7247, up 0.2 per cent on the day. The yen weakened about 0.2 per cent to 109.43 to the US 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.

Investors are still nervous about the fate of Evergrande, which missed interest payments due on Monday to at least two of its largest bank creditors, Bloomberg reported.

The dollar index stood at 93.188 in by midday trade in London, staying not far off Monday's one-month high of 93.455. The euro hardly budged at US$1.1733, having stabilised at a one-month low of US$1.1700 on Monday.

Earlier, the common currency dropped to a seven-month low of 127.93 yen, as the safe-haven Japanese currency was supported by the cautious mood.

The Chinese yuan firmed to 6.4654 per dollar, edging back from one-month low of 6.4878 set on Monday.

Another major focus for the day is the US Federal Reserve, which is expected to drop more hints on its future policy path, including when it might start tapering its bond buying and when to begin raising interest rates. There are rising expectations the central bank will signal plans to start reducing its massive bond purchases in November if incoming data holds up.

Cryptocurrencies bounced back a tad after plunges in the previous session. Bitcoin rose 5 per cent to US$42,754 after having hit a 1½-month low of US$39,573. Ether bounced 6 per cent to US$2,950, having fallen to as low as US$2,732, down more than 30 per cent from a four-month peak hit earlier this month. REUTERS