TA:Australian dollar jumps on economic rebound in GDP data
THE Australian dollar was higher late today after data showed the economy bounced back strongly in the second quarter from the flood ravaged start to the year.
The currency jumped on the second-quarter national accounts report, which showed the Australian economy expanded 1.2 per cent in the second quarter from the first, after contracting 0.9 per cent in the first quarter. Annual economic growth rose 1.4 per cent on year.
Mining led the rebound, supported by stronger consumer spending, which economists said could alarm the Reserve Bank of Australia, which is watchful of inflation risks.
At 4.30pm AEST, the Australian dollar was at $US1.0606, up from $US1.0522 late yesterday. Against the Japanese yen, the Australian dollar was at Y81.935, up from Y80.34.
Earlier, a speech by RBA Governor Glenn Stevens also supported the Australian dollar, with little sign the central bank is contemplating cutting interest rates.
Mr Stevens said the current environment is generally favourable for the Australian economy and conditions at the global level weren't yet as bad as those in 2008.
"Obviously, troubles in Europe and the US can feed through to the local market over time, but at this stage of proceedings the macro data is backing up the RBA's 'hold fire' approach on interest rates," said Tim Waterer, senior currency trader at CMC Markets.
Talk that China may move to ease monetary policy also spurred the Australian dollar, traders said. Reports in the China Securities Journal suggested China may soon lower bank reserve requirements, in the expectation that inflation will ease in coming months.
David Scutt, senior currency trader at Arab Bank, said reports that US President Barack Obama is spending $US300 billion to spur employment in the world's largest economy, also supported sentiment. Mr Obama will speak tomorrow in the US.
"$US300 billion is hardly a drop in the ocean. It's pretty punchy spending," Mr Scutt said.
However, the Australian market may get a reality check via employment data for August tomorrow. Unemployment rose in July, taking many by surprise. A further increase would add to caution at the RBA, traders said. Economists expect unemployment will be unchanged at 5.1 per cent.
