The Reserve Bank of Australia surprised markets Tuesday by holding its policy rate unchanged at 3.75% after a string of increases at its previous three meetings. The decision is considered being a pause in the tightening cycle, with the bank taking a breather to gauge the impact of the 75 basis points in total tightening from October to December of 2009

Without many major economic data on the calendar, the dollar advanced on the Australian dollar and other high-yielding currencies Tuesday but turned lower against the euro, after the People’s Bank of China said it would require banks to hold more cash in reserve as it attempts to restrain credit growth.

Today the economic calendar has witnessed some remarkable Chinese indicators which insured the recovery of the Chinese economy and the effectiveness of its $585 billion stimulus package. The nation released nine key economic data for November.

The euro zone’s ECB released its monthly report for November; revising upwards economic growth for this year and 2010 from the previous predictions in August that inflation will rebound in the upcoming months, while assuring that current interest rates of 1.00% are appropriate.

By Masayuki Kitano
TOKYO, Oct 22 (Reuters) - The dollar bounced off a 14-month low against a basket of currencies and the Australian dollar eased on Thursday as investors locked in profits after Chinese economic data offered no major surprise.

China released a bunch of economic data Thursday indicating the economy expanded at an accelerated rate in the third quarter, raising the prospect that Beijing may begin to unwind its crisis-driven expansionary policies by year’s end.

Crude for November delivery traded as high as $80.05 a barrel -hitting a fresh one-year high- in trading Tuesday afternoon in Tokyo, though it later retreated slightly to $79.93, still up 32 cents.
The gains were helped by recent strong economic data bringing money in from the sidelines also buoyed prices. We would attribute most of this rally to this inflow of liquidity into the market.

Most of the economic data released so far on the U.S. is better than the market forecasts, demonstrating an improvement throughout most of the economic sectors and showing clearly that a recovery is taking place gradually.

Investors have a week ahead full of top-tier economic data and news including key readings on retail sales and inflation, and trying to fine-tune expectations about the shape of the economic recovery. Already this week has started with the dollar gaining against majors taking a correctional trend after the previous week’s drop.