* Gold holds near NY levels, off 2-week lows
* Early Chinese buying lifts prices
* Coming Up: Weekly U.S. mortgage market index, 1200 GMT

SINGAPORE, March 10 (Reuters) – Gold steadied on Wednesday after the euro bounced slightly higher against the U.S. dollar though weaker oil prices could prompt new selling, traders said.

Dealers noted early bargain hunting from Chinese speculators but gold prices were susceptible to sharp movements due to low volumes. Platinum and palladium slipped in early trade but held near recent highs.

Spot gold was at $1,122.00 an ounce by 0304 GMT, barely changed from New York’s notional close on Tuesday, when it dropped to $1,108.55 an ounce, its weakest since Feb. 26, because of a resurgent dollar and falling oil prices.

Gold was around 2 percent below a 6-1/2-week high near $1,150 hit in early March. Several attempts to revisit a lifetime high around $1,200 struck in early December were met by heavy profit taking but steady investor interest could lend support.

“If you look at it on a week-on-week basis, the SPDR gold trust holdings of gold are still up. It means that investment demand is still there and it is supported by retail,” said Wong Eng Soon, an investment analyst at Phillip Futures in Singapore.

Debt concerns in euro zone countries also boosted gold’s appeal as a hedge against currency fluctuations, said Wong, adding that the metal could find support at a February low around $1,080 an ounce. “With a lack of confidence in the paper currencies, gold definitely has to be quite well supported.” he added.

The world’s largest gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings stood at 1,116.120 tonnes as of March 9, unchanged from the previous business day, but up
from 1,111.556 in early March. U.S. gold futures for April delivery was little changed at $1,122.6 an ounce.

The euro edged up against the dollar, trading just above $1.3600. The common currency had come under fresh pressure after Fitch ratings agency said it still has a negative outlook on Portugal’s credit rating.

U.S. crude futures extended declines on Wednesday from an eight-week high after industry data showed a sharp build in U.S. crude inventories. In theory, weaker oil prices reduce
gold’s appeal as a hedge against inflation.

Platinum held near its highest in more than a month at $1,607 an ounce hit on Monday, while palladium barely moved after being hit by a profit taking since rising to a two-year high at $480 late last week.

“It appears unlikely that the metal can hold above the $500 an ounce mark for any extended period of time; at least not in the near future, ” said precious metals house Heraeus in a
weekly report. “In the coming days we expect platinum to calm down a bit, with a trading range in a higher band than that of the past two weeks. A break above the $1,606 an ounce mark in the next few trading days seems unlikely,” it added.

Platinum and palladium, primarily used in catalysts used in vehicle exhaust systems, has benefited from well-received February car sales numbers from China and the United States. The world’s biggest palladium producer, Norilsk Nickel, also told the Reuters Global Mining and Steel Summit that the metal is an appealing investment because future jewellery and industrial demand will be strong.

#

* Risk aversion and repatriation flows boost yen
* Ratings agency comments weigh on sterling, euro
* China’s commitment to buy Treasuries helps dollar

NEW YORK, March 9 (Reuters) – The yen gained broadly on Tuesday amid Japanese repatriation flows, while the euro declined on concerns that peripheral euro zone economies could face debt problems similar to those of Greece.

Appetite for risk had been boosted by Friday’s stronger-than-expected U.S. employment report, pushing the yen down to two-week lows versus the euro and the dollar.

Comments from Fitch Ratings on Portugal’s austerity measures on Tuesday, however, prompted a comeback for the yen and triggered further selling in the euro zone common currency.

The dollar was supported after China said it was committed to buying U.S. Treasuries.

“The combination of today’s risk-averse trading and repatriation of yen has been the key driver over the last 12 hours,” said Camilla Sutton, currency strategist at Scotia Capital in Toronto.

Traders said Japanese exporters were in the market buying yen fairly actively, with further demand for the Japanese currency likely in the run-up to fiscal year-end on March 31.

“The feeling is that we are beginning to see fiscal year-end repatriation flows for Japan. The yen will remain in favor over the next few weeks as Japanese corporates bring money back home,” said RBC currency strategist Adam Cole in London.

In late afternoon trading in New York, the dollar was trading down 0.4 percent at 89.93 yen.

The yen was up about 0.2 percent against the Canadian dollar, 0.9 percent against the Swiss franc, 0.6 percent against the euro and 0.9 percent against the pound.

Higher-yielding currencies such as the Australian dollar also fell against the Japanese currency. Aussie/yen slipped 0.2 percent.

Analysts at the Bank of Tokyo/Mitsubishi also noted that an incentive this year with Japanese corporations not having to pay the difference between local tax rates abroad and in Japan when funds are repatriated may play a greater role in bringing funds home in March. But the bank cautioned the impact of the incentive on the currency may be temporary.

Further yen gains could also be limited by speculation that the Bank of Japan may take additional steps to ease monetary policy. The BOJ is in the spotlight after the Nikkei newspaper reported on Friday that the central bank was examining easing again and may decide on such a move when it meets on March 16-17.

CHINA’S COMMITMENT

China, the world’s biggest holder of foreign exchange reserves, renewed its commitment to the U.S. Treasury market on Tuesday but said it would be wary of substantially boosting its gold holdings.

“If China is not diversifying their reserves into gold, then there is no realistic alternative to absorb their demand outside of U.S. dollars,” said Kathy Lien, director of research at GFT in New York.

The pound was under widespread pressure, dropping to a one-week low versus the dollar after ratings agency Fitch said Britain’s sovereign credit profile had deteriorated.

Earlier, a Moody’s Investors Service report saying Britain faces a difficult balancing act in deciding how and when to reduce support for the banking sector had also weighed on the pound.

Against the dollar the pound was down around 0.5 percent at $1.4990.

The euro was down around 0.3 percent against the dollar at $1.3595, continuing to struggle in the face of debt concerns in euro zone countries such as Greece and Portugal.

Fitch Ratings said on Tuesday it still has a negative outlook on Portugal’s AA ratings and was studying details of the country’s new austerity measures announced Monday.

“Even though Fitch also stated that the contagion risk to Portugal and Spain from Greece is not great, there are sufficient worries in the market concerning EMU to keep the euro ‘on the back foot’,” said FOREX.com analysts in a note.

Greek Finance Minister George Papaconstantinou said on Tuesday in Washington his country was taking necessary steps to get its budget under control but said the issue was also a European one.

Greece has been a drag on the euro in 2010, which has lost 5 percent against the dollar so far this year and 8.1 percent against the yen.

#

The Financial Times has reported that Marsh and McLennan have put their Kroll unit up for sale for circa $1.3bn.

After the close Texas Instruments raised their earnings and revenue forecasts, citing that demand was higher than their current production levels.

Australian business confidence matched a seven year high according to National Australia Bank.

Today’s Financial Times reports that China will keep buying US debt.

The Greek Prime Minister warned last night that if the Greek crisis worsened, it could lead to a new financial meltdown.

#

* UK BRC Retail Sales (Feb) rose +2.2% y/y.

* France’s Trade Deficit (Jan) was better than expected at EUR -3.681bn.

* Switzerland CPI (Feb) ticked down to+0.9% y/y (1.0% expected, 1.0% prior).

* UK Trade Deficit (Jan) came out at a lower than anticipated GBP -7.987bn (7.00bn expected) but last month’s reading revised up to -7.01bn from -7.28bn.

* An article in the UK’s Guardian reports that Europe bars Wall Street banks from government bond sales.

* French Economy Minister Lagarde quoted as saying European Monetary Fund idea interesting but not a short term priority.

* According to the IMF, Chinese growth may lead to changes in Yuan valuation “in coming months”.

* Gold is lower today after headlines suggested China no longer puts gold as a major component of foreign exchange (lows today $1108.88).

* Fed’s Evans said inflation is “significantly below” his benchmark, and added accommodative policy likely to be “appropriate for some time”.

#

BP are facing a $3mn fine over safety issues at an oil refinery in Ohio.

Australian business confidence matched a seven year high according to National Australia Bank.

Today’s Financial Times reports that China will keep buying US debt.

The Greek Prime Minister warned last night that if the Greek crisis worsened, it could lead to a new financial meltdown.

Traders note that we have the weekly oil inventories tomorrow.

#

Australian business confidence matched a seven year high according to National Australia Bank.

Today’s Financial Times reports that China will keep buying US debt.

The Greek Prime Minister warned last night that if the Greek crisis worsened, it could lead to a new financial meltdown.

#

FX markets were nervously quiet in Asian session, just waiting for a directional catalysis. Initially, the deputy governor of the PBoC and the head of the SAFE, Yi Gang, at a press conference in Asia, provided some detailed and honest comments regarding China’s foreign exchange and reserve policy. These comments reinforce remarks made on Friday from PBoC Gov. Zhou and Prime Minister Wen.

On the subject of FX reserve management, he stated that reserves were appropriately diversified in USD, EUR, JPY and emerging currencies taking in account critical factors, such as foreign investment, external debt and payments and trade. On CNY exchange rate, he reiterated PBoC Gov. Zhou and Prime Minister Wen comments, that a “managed float” regime was a long term goal and the approach would be steady and cautious.

We would like to point out that while there has always been a plethora of “sound bites” surrounding the CNY, the comments are now coming from people in real positions to make changes. On the question of purchases of US Treasuries, he emphasized that China is a responsible investor and then went on to say that given the size China’s foreign reserves, US Treasuries are logically a choice market for China.

Perhaps most interestingly was Gang mentioning Gold purchases and the fact that official holdings of gold jumped from 400 tons to 1,054 tons. Yet still accounts for less than 2% of China’s foreign reserves. He goes on to say that China will be careful in purchasing gold since any price increase would hurt domestic consumers and that over the last 30 year gold didn’t provide a solid rate of return. We would suspect that after the markets have time to digest China’s gold remarks we see a market sell-off in the precious metal. The comments were mildly supportive of risk correlated trades and support our view that a return to a managed float in the CNY will happened this year.

In early European trading the market was hit with comments from Fitch rating agency which shook investor’s confidence. First was the news that Fitch maintains a negative outlook on Portugal and might be downgraded should fiscal consolidation be insignificant. Then Fitch stated that UK sovereign credit profile had deteriorated ´Pretty Sharply´. Risk appetite mechanically rushing toward the exits and EUR/USD crashed through 1.3600 psychological support. With an empty calendar ahead of us we suspect markets will be stuck in a range bound day.

#

Despite being the world’s largest gold producer, there was a school of thought that they may be tempted to buy gold of the IMF, who have made 191 tonnes available for purchase.

These comments dented the recent run in gold, now trading in and around the $1,125 level.

Australian business confidence matched a seven year high according to National Australia Bank.

Today’s Financial Times reports that China will keep buying US debt.

The Greek Prime Minister warned last night that if the Greek crisis worsened, it could lead to a new financial meltdown.

#

* Japan Jan leading index rose 2.4 points, coincident index up 2.5 points.

* UK Feb RICS house price balance jumped to 17 vs. 30 exp lowest since Aug “09, prior Jan reading 31.

* UK Feb BRC like-for-like retail sales 2.2% y/y vs.Jan -0.7%, lowest in survey history, while Feb total sales 4.5%.

* Australia Feb NAB business conditions index rose to 8, confidence climbed 19, Jan 3, 15.

* Australia Feb job ads 19.1% m/m, highest in yr, newspaper 13.1%, internet 19.6%.

* According to a UK Times poll Labor-Tories are currently neck-neck in marginal seats.

* Wall Street Journal states that Moody’s sees UK bank bailout wind-down could trigger UK bank ratings cuts.

* In China, SAFEs Yi Gang states that reserves are appropriately diversified in USD, EUR, JPY and emerging ccys and reiterates yesterdays Wen comment on the CNY exchange rate policy.

#

* Sarkozy comments help euro on receding Greek concerns
* Greek PM remarks capping euro gains
* China hints it may allow yuan appreciation in future
* Aussie, New Zealand dollars trading higher

NEW YORK, March 8 (Reuters) – The euro rose slightly against the dollar on Monday as concerns about Greece’s fiscal crisis eased after French President Nicolas Sarkozy said there are plans to support the debt-strapped country, if necessary.

Gains in the euro, however, were limited after Greek Prime Minister George Papandreou on Monday warned that if the Greek crisis worsened it could lead to a new global financial meltdown.

“Sarkozy giving a thumbs up to the euro and an EU backing for Greece gave us a better bid tone before we started the market this morning,” said Dean Popplewell, chief currency strategist, at OANDA in Toronto. “But with the lack of North American data especially after last Friday’s surprising U.S. employment report, the market is sitting back and digesting the comments out of Europe especially from Papandreou.”

In quiet, late afternoon trading, the euro was slightly higher at $1.3629. Greece has been a drag on the euro in 2010, which has lost 4.8 percent against the dollar so far this year and 7.6 percent against the yen. The euro though has held up well this month, trading flat against the dollar after falling 1.5 percent in February. Popplewell said the currency’s bias is still clearly negative. “People do believe Greece’s problems are far from over and contagion is certainly a strong possibility,” he said.

Yuan non-deliverable forwards, meanwhile, rose to a five-week high after the Chinese central bank chief hinted China would eventually drop the dollar/yuan peg it had imposed since mid-2008 to help fight the global financial crisis. China has effectively re-pegged its exchange rate at around 6.83 yuan per dollar since mid-2008.

The China news had little impact on the currency market, although analysts said going forward the Chinese move should make Japanese authorities comfortable with allowing the yen strengthen a bit more.

On Monday, the dollar was flat against the yen at 90.27 yen. The euro was also little changed against the Japanese currency at 123.04 yen , having hit a two-week high earlier on Monday. “Fears of further monetary policy easing by the Bank of Japan seem to have abated somewhat…ahead of next week’s policy meeting,” said Matthew Strauss, senior currency strategist, at RBC Capital Markets in Toronto. “However, given the deflationary environment, do not be surprised if market chatter returns to this topic (easing) in the very near future, weighing on the yen.”

The Australian dollar was up 0.3 percent at US$0.9094, having earlier risen to its highest since Jan 21. The higher-yielding currency, boosted by improved risk sentiment, gained further after Royal Dutch Shell and PetroChina are bidding more than $3 billion for Australia’s Arrow Energy. Analysts said a break above US$0.9100 helped the currency extend gains, with the next target seen at US$0.9150. Against the yen, the Aussie was at 82.09 yen, up 1.7 percent, having earlier hit a two-week high.

The New Zealand dollar rose 0.5 percent versus the U.S. dollar to US$0.6999. The Aussie and New Zealand dollars were also supported by what seemed like improving risk appetite, with U.S. stocks flat to slightly up and U.S. crude futures trading modestly higher.

#

* Switzerland unemployment rate (Feb) fell to 4.4% in line with expectations (4.5% prior).

* Switzerland retail sales (Jan) surged +4.4% y/y as expected, but prior reading was revised down to 4.4% from 4.7%.

* EU Sentix investor confidence index (Mar) posted a slightly better than expected -7.5% (8.8% expected, 8.2% prior).

* Germany industrial production data (Jan) mixed; this month’s reading missed forecasts at 0.6% m/m (1.0% expected) but last month revised up to -1.0% from -2.6%.

* Greek PM Papandreou stated Europe must help Greece take a longer view; says budget cuts won’t lead to sustainable growth.

* ECB’s Stark rebutted suggestions in an FT article that a European Monetary Fund is in the pipeline. He said it would be against EMU rules and undermine public acceptance of EUR.

* NDRC chairman quoted as saying China will continue to reform Yuan policy in controlled manner.

* Canada House Starts (Feb) were a stronger than forecast 196.7 (190k expected, 186.3K prior).

#

AIG will sell its overseas life and health insurance unit for $15.5bn.

Bank of New York Mellon have agreed to buy BHF Asset Management for circa $343mn.

Hewlett Packard cut their Q1 earnings by 3 cents a share in reaction to a lawsuit involving their subsidiary Electronic Data Systems.

JP Morgan raised their coverage on Cisco Systems from Neutral to Overweight.

#

Risk appetite has been cautiously creeping back into FX markets at the start of this trading week. While a one day doesn’t make a trend, the broader environment is shaping up to support a sustained rally in risk sentiment.

First of all, the passing of the new austerity measures by the Greek congress on Friday was a step in the right direction. While unions immediately called for a general strike for Thursday, we anticipate protests will be orderly and won’t spillover into larger social disruption, prompting Greece’s deficit trimming to stay on course.

In addition, the Greek PM has been visiting Germany and France over the past few days drumming up, if nothing less then, strong political support and starting earnest discussions over a European version of the IMF (both positives). According to IMM data it looks as if pressure has been easing off the EUR as extreme short positions have begun to unwind and the extraordinary bearish sentiment fizzles out (balanced media coverage).

In China, Governor Zhou of the PBoC made comments which hint to greater flexibility in the USD/CNY. His key points were that the implicit peg to the USD since July 2008 was part of a special response to the global financial crisis. A return to the “managed float” exchange rate regime started in July 2005 would come and that any exit form the special situation would be managed prudently, since the global environment was still very precarious. China will release a slew of economic data this week, which should point to strong growth (good for risky cyclical currencies) and reacceleration in inflation.

The EUR/CHF has been trading in a conspicuous pattern for the last few weeks (since last intervention), balancing on the 1.4620 SNB defined “line in the sand.” In recent weeks Switzerland’s economic data has been surprisingly positive with both growth signaling a strong recovery and inflation increasing at a healthy pace. While we are not expecting any shift in monetary policy on Thursday rate decisions, we could see a softening on policy commitments regarding the CHF. While the chance of the SNB completely removing the threat of FX intervention is remote, there is a chance the members provide a slight more dovish tone. We suspect that the offical support for the CHF is nearing an end and even a gentle shift should send the EUR/CHF lower.

And on a final note, we believe conditions are nearly perfect for an extended period of JPY weakness. The better than expected NFP Friday could been seen as the catalyst with daily Ichimoku cloud resistance at 90.75 providing the next hurdle. In short, the BoJ has expressed their desire to flight deflation and JGB purchases seem the likely tool, improving risk trading environment (VIX stands at 18) and G10 central banks moving forward with tightening in Q2 creating attractive yield differentials.

#