Australian dollar perky on upbeat data, RBA in focus

[SYDNEY] The Australian dollar rose on Tuesday after data showed robust government spending bolstered economic growth last quarter while the country's current account deficit also came in well below expectations.

The Australian dollar posted its fifth straight day of gains, hitting an intra-day peak of US$0.7632, its highest since Aug 26.

The upbeat data reinforced expectations the Reserve Bank of Australia would hold rates at 1.50 per cent at its monthly meeting on Tuesday.

Australia's current account deficit came in at A$15.5 billion (S$16 billion) last quarter compared with expectations of A$19.75 billion, after a big downward revision to the previous quarter's shortfall.

Combined with firmer public spending, it suggested there was some upside risk for second-quarter gross domestic product (GDP) figures due on Wednesday.

After some economists nudged up their forecasts, the general expectation was that GDP grew around 0.5 per cent last quarter, still down from 1.1 per cent in the first quarter, extending a long phase of growth.

"The Australia economic expansion will celebrate its 25th birthday when the June quarter economic growth figures are released on Wednesday," said Craig James, chief economist at Commonwealth Bank.

"Australia is zeroing in on the Netherlands for the gold medal of the longest economic expansion in the modern era."

The Aussie was also stronger on the New Zealand dollar , rising for a second straight day. Although it has lost 2.1 per cent on the kiwi this year so far.

The New Zealand dollar inched higher on Tuesday to US$0.7320, aided by expectations for another strong dairy auction late on Tuesday.

BNZ FX Strategist Kymberly Martin said the RBA's policy meeting may pass without creating too many ripples for the Aussie, or kiwi.

"The market will peruse the RBA comments for subtle change of tone since the last meeting," said Ms Martin.

"Any tweaking of its language could influence the direction of NZ OIS (rate) pricing," said Ms Martin. The RBA statement is due out at 0430 GMT.

New Zealand government bonds were mostly lower in price with yields 1.5 basis point higher.

Australian government bond futures eased, with the three-year bond contract down 2 ticks at 98.55. The 10-year contract slipped 1.5 ticks to 98.08.

REUTERS