* Commodity currencies recover after China cenbank move
* German 2009 GDP shrinks 5.0 pct
* Euro little changed in New York trade
(Recasts, updates prices, details)
NEW YORK, Jan 13 (Reuters) - High-yielding currencies
rallied on Wednesday, reversing losses in the prior session, as
investors concluded China's unexpected monetary tightening
would not derail the world's third largest economy.
Commodity-linked currencies such as the Australian dollar
recovered some losses but the market remained nervous that the
withdrawal of liquidity may prompt unwinding of positions in
riskier assets as economies recover and central banks focus on
inflation risks.
"Commodity currencies are on a much better footing today,
but what happened in China is a reminder that they are
vulnerable," said Omer Esiner, senior market analyst at
Travelex Global Business Payments in Washington.
Esiner said the reaction to China's measures yesterday was
too far, too fast and with more thought, investors realized the
impact of China's moves won't be detrimental to global economic
growth.
In midafternoon trading in New York, the Australian dollar
climbed 0.9 percent to 84.42 yen <AUDJPY=R> after its biggest
daily drop in about eight weeks on Tuesday <AUDJPY=>. It also
rose 0.3 percent to $0.9226 <AUD=>, with traders noting
sovereign demand facilitating the move.
The yen declined broadly, paring gains Tuesday after
China's central bank raised banks' required reserves ratio, a
move which prompted investors to unwind yen-selling positions.
For details, see []
The dollar rose 0.6 percent to 91.49 yen <JPY=> after
falling to 90.73 yen Tuesday. The euro was up 0.6 percent to
132.66 yen <EURJPY=R>.
GAINS CAPPED
The euro was little changed at $1.4496 <EUR=>, according to
Reuters data. Earlier it hit $1.4582, its highest since Dec.
16. Traders said demand from Asian sovereign entities helped
support the single European currency as well as bullish
technical indicators.
Currency "moves are also starting to take on some technical
significance, with the euro and pound starting to break more
clearly above their early January highs," said Nick
Bennenbroek, head of currency strategy at Wells Fargo Bank in
New York, in a client note.
Still, euro gains were capped as data showed the German
economy contracted more than expected in 2009. []
The dollar index <.DXY>, which tracks the performance of
the greenback versus a basket of six major currencies, was
little changed after dropping to its lowest since mid-December
earlier in the session.
Analysts said the focus may turn now to the U.S. corporate
earnings season, which ramps up this week, and reports on
retail sales and weekly jobless claims Thursday.
The Federal Reserve will release its survey of economic
conditions, known as the Beige Book, later Thursday.
"Any significant improvement (in the Beige Book reading)
would be mildly bullish for the dollar in the current trading
environment," said Sacha Tihanyi, a currency strategist at
Scotia Capital in Toronto.
STERLING RISES
Sterling rose as high as $1.6306 <GBP=>, its highest since
mid-December, after Bank of England policymaker Andrew Sentance
said in a newspaper interview that the central bank was close
to holding back on stimulus. [] It last traded up
0.6 percent at $1.6270.
The pound was also boosted after UK industrial production
data came in stronger than expected. []
The Swiss franc briefly dipped against the euro to 1.4804
francs, as traders cited talk of bids from the Bank for
International Settlements, which sometimes acts in the currency
market for individual countries' central banks. The euro was
last up 0.1 percent at 1.4772 francs. <EURCHF=>
(Reporting by Nick Olivari and Vivianne Rodrigues; additional
reporting by Neal Armstrong in London; editing by Jeffrey
Benkoe)
