* Aussie dips, then steadies after Chinese rate move
* Euro rebounds again from below 200-day moving average
* Robust Chinese economy should underpin Aussie into 2011
* London holiday, New York blizzard keep trading light
(Adds quote, detail, updates prices; changes dateline,
previous LONDON)
By Steven C. Johnson
NEW YORK, Dec 27 (Reuters) - The Australian dollar dipped
briefly on Monday after the Chinese central bank's weekend
interest rate hike, while the euro rose against the dollar
after breaking above its 200-day moving average.
Trading ranks were extremely thin, with London closed on
Monday and Tuesday and a blizzard in New York limiting
activity, and that ensured only minor price fluctuations.
The Australian currency was the biggest mover out of the
gate, falling as low as $0.9987 after China's Christmas Day
interest rate hike on Saturday, though it had clawed back to
$1.0021 <AUD=> early in New York, down 0.1 percent. The
currency hit a six-week high of $1.0067 last week.
The euro rose after failing to hold losses below its
200-day moving average -- $1.3087, according to Reuters data.
A move below that level is usually indicative of more
losses. While fears that a euro zone debt crisis could spread
have pushed the euro below the 200-day moving average in five
of the last six sessions, it has rebounded swiftly each time.
It was last up 0.3 percent at $1.3147 <EUR=>.
"With no economic news, we're focusing on these technical
factors, and that push above the 200-day average has been a
catalyst for the euro," said Omer Esiner, strategist at
Commonwealth Foreign Exchange in Washington. "And with London
off and the blizzard in New York, things are very subdued."
The euro hit a three-week low of $1.3055 last week and its
outlook is still clouded by Spain and Portugal, which may have
trouble refinancing their debt in the new year.
HIGHER CHINESE RATES
Australia's economy has benefited from strong Chinese
demand, and markets fear China's attempts to dampen inflation
with higher interest rates could hurt domestic Chinese demand.
Traders said the knee-jerk move in the Australian dollar
had more to do with the timing of the rate hike, which came on
Christmas, then with the move itself.
"There was a knee-jerk sell-off in the Aussie but investors
knew this China move was coming eventually," said Geoffrey Yu,
currency strategist at UBS. "Providing Chinese data holds up in
2011, the Aussie should stay supported."
Danske Bank analyst said they expect three more Chinese
rate hikes in 2011, "and they will probably be frontloaded" in
the first half of the year.
TRADING THE YEN
The dollar was flat at 82.82 yen <JPY=, near the lower end
of a recent 82.50-to-84.50 yen range.
"A sharp rise in U.S. bond yields earlier this month has
prompted many traders to bet on a rise in the dollar. But as
the dollar was unable to extend gains, traders have been
cutting long positions," said Katsunori Kitakura, chief dealer
at Chuo Mitsui Trust Bank.
A tight correlation between the exchange rate and U.S.
yields started to weaken this month. Last week, the dollar fell
1 yen even as the 2-year Treasury yield rose five basis
points.
But many traders attribute that to illiquid year-end market
conditions and expect the correlation to return when market
players are back from the holidays.
An auction of $35 billion in two-year U.S. Treasuries
later on Monday will be watched closely, given recent spikes in
yields.
(Additional reporting by Neal Armstrong in London and Hikeyuki
Sano in Tokyo; Editing by Dan Grebler)
