* China move boosts commodity currencies
* Dollar/yen rises as Japanese unit struggles broadly
* Euro lower; traders cite BNP ratings cut
(Recasts, updates prices, adds quote, byline)
By Gertrude Chavez-Dreyfuss
NEW YORK, June 21 (Reuters) - The U.S. dollar gained
against the yen as the Australian and New Zealand currencies
hit over one month highs on Monday after China's vow to allow a
flexible yuan rekindled optimism about global recovery.
Beijing's announcement over the weekend should boost
purchasing power and demand in the the world's third largest
economy. It should also help global companies that sell to
China and underpin commodity-tied currencies such as the
Australian dollar.
"China's move has unleashed improved confidence and higher
risk appetite," said Richard Franulovich, senior currency
strategist, at Westpac in New York.
"Commodity currencies such as the Aussie and Kiwi will
always be the biggest beneficiaries on the ground that yuan
strength raises China's purchasing power. If the Aussie is
trading the way it is, then that tends to drag Aussie/yen,
Kiwi/yen higher. And dollar/yen gets dragged in that vortex as
well."
The Chinese currency closed at its highest level against
the U.S. dollar since its July 2005 revaluation. The yuan ended
the day at 6.7976 against the dollar, up 0.42 percent from
Friday's close of 6.8262. It hit a high of 6.7958 in intraday
trade, an all-time high since the revaluation, and up as much
as 0.47 percent from the central bank's mid-point, nearing its
limit of 0.5 percent. See [].
In early afternoon trading, the high-yielding Australian
dollar <AUD=D4> gained 0.6 percent to US$0.8774, off an earlier
one-month peak at US$0.8860.
One-month AUD/USD risk reversals, a measure of currency
sentiment in the options market, are still showing a bias for
puts -- suggesting expectation of further declines -- at -4.20
vols <AUD1MRR=GFI> on Monday, from -4.425 last Friday. But
Aussie risk reversals have come off extreme levels.
Two weeks ago, the put bias on the Aussie traded as high
-5.875 vols given the negative global risk appetite arising
from the euro zone debt crisis.
KIWI GAINS, EURO FALLS
The New Zealand dollar <NZD=D4> rose 0.2 percent to
US$0.7081 after an earlier high at US$0.7153, its strongest
level since May 14.
The U.S. dollar rose 0.4 percent against the yen <JPY=> to
90.99, boosted by steep gains in the Australian dollar/yen
cross <AUDJPY=R> and New Zealand dollar/yen pair <NZDJPY=R>.
Some analysts, however, believe the impact on the market of
of the latest news from China could be short-lived.
"China has an incentive to frontload moves before the G20
meeting and the U.S. currency report so we could see a
continuation of these moves through most of this week and
possibly into next," said Steven Englander, Citigroup's global
head of currency strategy. "But the incentive for China to make
currency moves after the currency report is released
diminishes."
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Main yuan coverage []
Winners and losers from a firmer yuan []
Reuters insider: http://link.reuters.com/nyq23m
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The euro, meanwhile, fell 0.5 percent to $1.2317 <EUR=EBS>,
after earlier trading to a one-month high $1.2490, according to
electronic trading platform EBS.
Marc Chandler, global head of currency strategy at Brown
Brothers Harriman in New York attributed the decline in the
euro to news ratings agency Fitch cut BNP Paribas' long-term
international rating to AA- from AA. See [].
"The break down (in the euro) now leaves a potential key
reversal pattern unfolding. A close below there would signal an
immediate test on the $1.2290 and possibly as low as $1.2200,"
Chandler said.
(Additional reporting by Nick Olivari: Editing by Andrew
Hay)
