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DJ Australian Dollar Supported by Weak Greenback
December 24, 2013

By James Glynn SYDNEY--The Australian dollar was little changed Tuesday in holiday-thinned trade, but taking support from a weaker U.S. dollar. The U.S. dollar weakened overnight amid profit-taking before the year-end holiday season begins across major markets in the U.S. and Europe. Traders said the greenback was ripe for profit-taking, having rallied last week on the news that the U.S. central bank would reduce the size of its monthly bond buying program, a key element of its support of the economy. At 0430 GMT the local currency was trading around US$0.8915--down slightly from US$0.8928 around the same time Monday. A close watch was also being maintained on Chinese interest rates which have risen in recent weeks, prompting liquidity injections by the People's Bank of China. China is Australia's largest trading partner. The PBOC said Friday that it had added over 300 billion yuan into the financial system over a three-day period through a special and covert form of liquidity operation targeting a select group of banks. The turmoil in China's money market last week was sparked by a scramble for funds by banks and other borrowers in the world's second-largest economy as they neared the end of the year, when they typically need extra cash to meet regulatory requirements and funding demands from companies. "The PBOC itself was intimating yesterday that it does not see a liquidity shortage, instead suggesting that some banks are hoarding liquidity and should instead be lending it out," the National Australia Bank said in a note to clients. U.S. data and shares price gains have also helped the Aussie dollar. U.S. consumer spending rose by 0.5% in November the largest increase in five months. It was the seventh straight month of gains. U.S. share markets rallied to fresh record highs on Monday as Apple shares surged on a distribution deal with China Mobile. -Write to James Glynn at