The Australian sharemarket extended its recovery rally as investors wagered the worst was over for Chinese growth and credit market jitters.
Following the tentative 0.5 per cent rally on Wall Street last night the S&P/ASX 200 index climbed 1.1 per cent at its peak but settled to close 40.2 points, or 0.75 per cent, up at 5376.8 as Chinese stocks slipped into the red before lunch.
Sentiment was also capped by renewed weakness by the Chinese yuan and a jump in Shanghai money rates to the highest level in more than a month following the draining of liquidity by the People's Bank of China yesterday.
The Shanghai composite index was off 0.1 per cent at the close of the ASX and in Tokyo the Nikkei index was up 0.3 per cent.
The Australian dollar climbed US0.5ï¿½ to a four month high of US91.90ï¿½ as the easing Chinese growth outlook and quarter-end currency repatriation continued to squeeze short sellers.
Comments by Reserve Bank governor Glenn Stevens also fuelled the dollar scramble after he undermined concerted efforts to "jawbone" the dollar lower over the past year. He said sustainable growth could not come from manipulating interest rates and currencies.
Speaking in Hong Kong, he said there were "promising signs" from non-mining sectors of the Australian economy, where growth was needed to offset declining mining investment.
"There is encouraging early evidence that the so-called handover from mining-led demand growth to broader private demand growth is beginning," he said.
The Aussie also benefitted from a softer euro which lost ground following a weaker outlook from the German IFO business survey and comments from European Central Bank officials that they were prepared to act to support growth and that negative interest rates remained a policy option.
Overnight data was mixed for the US dollar and US stocks after new home sales fell 3.3 per cent in February and the Richmond Fed index dropped while consumer confidence rose to a six-year high.
Gold was little changed at $US1312 an ounce, copper jumped 2 per cent overnight and then slipped 0.2 per cent to $US6580 a tonne in Asian trade while spot iron ore was up 1.2 per cent at $US11.80 a tonne.
More to come