The Australian sharemarket got off to an uncertain start but finished in the black as Chinese stocks ended a choppy morning session higher.
Following the negative lead from Wall Street last night the S&P/ASX 200 index opened in the red and then traded sideways until the start of trade in Shanghai. The domestic index gained some traction along with rising Chinese stocks and it closed 16.8 points, or 0.31 per cent, up at 5366.9 as fund managers consolidated holdings ahead of the important March-quarter end.
Sentiment was capped by a weaker yuan following the warning from Chinese Premier Li Keqiang that there was increasing downward pressure on the economy.
The People's Bank of China cut its daily fixing by 0.04 percent to 6.1490 per dollar, the weakest level since September 27, while Premier Li said that China could not ignore the "difficulties and risks" to the economy.
The Shanghai composite index traded in and out of the red before settling 0.3 per cent up at the close of the ASX.
In Tokyo the Nikkei index also rallied from the red to trade per cent after Finance Minister Taro Aso the Japanese government would speed up spending of government cash in coming months as a surprise drop in consumer spending in February, despite a year of the radical package of polices referred to as "Abenomics" in reference to Prime Minister Shinzo Abe, the major proponent.
The rampant Australian dollar rose US0.3Â¢ to a fresh four-month high of US92.90Â¢ as economists continued to debate the likelihood of a rate cut, fuelling short-covering by speculators and unhedged exporters.
"The short covering rally in the $A is likely to take it up to around $US0.95," AMP head of investment strategy Shane Oliver said. "However, the broad trend in the dollar is likely to remain down reflecting softer commodity prices, a reversion to levels that offset Australia's high cost base and a decline in Australia's growth relative to that in the US."
Gold dropped $US10 to $US1293 an ounce as the US dollar continued to gain traction against most major currencies and metals.
Investor attention is swinging towards the eventual end of the US Federal Reserve quantitative easing program which at the current pace of tapering will wrap-up in October.
Copper rose 0.5 per cent to $US6590 a tonne and spot iron ore gained 0.3 per cent to $US112.30 a tonne yesterday.
More to come