WSJ:Australian Dollar Up Late As Economy Rebounds From Floods
Rates At 0630 GMT
Latest Change
AUD/USD 1.0606 +0.79%
AUD/JPY 81.935 +1.98%
6.50% May, 2013 3.7746% +0.1625
4.50% Mar, 2020 4.2582% +0.1158
10-Yr Spread To U.S. +203 bps +9 bps
SFE Sep 3-Year Futures 96.18 -0.16
SFE Sep 10-Year Futures 95.665 -0.12
SYDNEY (Dow Jones)--The Australian dollar was higher late Wednesday 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% in the second quarter from the first, after contracting 0.9% in the first quarter. Annual economic growth rose 1.4% 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 0630 GMT, the Australian dollar was at US$1.0606, up from US$1.0522 late Tuesday. 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.
Stevens said the current environment is generally favorable for the Australian economy and conditions in the global economy weren't yet as bad as those in 2008.
"Obviously, troubles in Europe and the U.S. 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 U.S. President Barack Obama is spending US$300 billion to spur employment in the world's largest economy, also supported sentiment. Obama will speak Thursday.
"US$300 billion is hardly a drop in the ocean. It's pretty punchy spending," Scutt said.
But heading into Thursday, the market may get a reality check in the shape of employment data for August. 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%.
-By James Glynn, Dow Jones Newswires; 61-2-8272-4685; james.glynn@dowjones.com
