SYDNEY (Dow Jones)--The Australian dollar fell in Asian trade Tuesday as trepidation ahead of a series of crucial economic data across the globe weighed on traders' penchant for riskier assets. Australian bonds were helped by the trepidation, especially on the short end of the curve. While Australian data on Tuesday mostly came in solid, including a narrow current account deficit and a rebound in both retail sales and building approvals in July, market participants mostly shrugged off the reports when it came to the Australian dollar. Instead, concern about upcoming Chinese and U.S. manufacturing data and U.S. jobs data this week had those long the Australian dollar paring back their positions, especially in the wake of weak equities in the U.S. and Asia. Ahead of the data, investment bank research departments have been particularly skeptical, with local bank Westpac hinting at possible weakness in the U.S. reports. "If we're on the right track, it's hard to get too bullish about this week being a turn around for equities and that will weigh on the Aussie," said Sean Callow, senior currency strategist with Westpac. At 0620 GMT, the Australian dollar was at US$0.8898, down from US$0.8977 late Monday, after failing to stay above the technical resistance level of US$0.9000 earlier in the week. Should the Australian dollar fall under more pressure, Callow tipped potential support at US$0.8840. Against the Japanese yen, the Australian dollar was at Y74.815, from Y76.255. The Australian dollar's position against the Japanese yen has been particularly hard hit in the past two days following the Bank of Japan on Monday unveiling a series of new measures that failed to meet traders' growing expectations. For Australian bonds, the rally was particularly impressive on the short end. Aside from the global economic worries, local bond appetite was further helped by news of New Zealand's South Canterbury Finance Ltd. collapse. Still, Tony Morris, senior interest rate strategist for ANZ, said a near two-week rally in bonds has pushed government debt to a level that is too expensive. On Tuesday, the three-year September spot contract rose 10 ticks to 95.70, while the 10-year contract rose 7 ticks to 95.24. Morriss pinpointed any level above 95.70 to 95.80 for three-year bonds as expensive, noting bond yields were now even below the current Reserve Bank of Australia cash rate of 4.5%, signalling a market pricing in the likelihood of cuts from the country's central bank. "This is a front-end driven rally and is a further disconnect from the fundamentals. You can argue whether they have scope to raise interest rates, but the case for a cut remains very weak," said Morriss, who added that even still, the recent momentum had to be "respected." -By Geoffrey Rogow, Dow Jones Newswires; +61-2-8272-4686; geoffrey.rogow@dowjones.com

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