News 2 - Dollar Jumps..- Writing for the News Media Assignment 3

Dollar jumps after better than expected GDP
From: AAP September 01, 2010 1:22PM Increase Text Size Decrease Text Size Print Email Share Add to Digg Add to del.icio.us Add to Facebook Add to Kwoff Add to Myspace Add to Newsvine What are these?


THE dollar was about US0.75c higher at noon (AEST) after Australia posted stronger than expected gross domestic product (GDP) data.

The local unit jumped after a report showed GDP rose by a seasonally adjusted 1.2 per cent in the June quarter, well above the market forecast of 0.8 per cent.

This compared with an upwardly revised 0.7 per cent in the March quarter.

The local unit was trading at US89.69c by 11.40am, compared with US89.48c just before the release of the GDP figures at 11.30am.

At noon, the local unit was trading at $US0.8972/75, up from yesterday's close of $US0.8893/96.

Since 7am today, the local currency traded between $US0.8902 and $US0.8980.

Nomura Australia chief economist Steven Roberts said the reason why the local unit got a good lift on the GDP announcement was partly to do with expectations.

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"Until this number and the data we had recently, there was a view there could be downside risks to the Australian economy," he said.

"As result of that the markets were factoring in the likelihood that maybe the RBA (Reserve Bank of Australia) may be forced into an interest rate cut, at some point.

"What the data today showed with the numbers we had in the last day or two is there is very little likelihood at all that RBA could consider a cut.

"More likely it it still has to think about a hike at some point later this year because parts of the economy are going so strongly they're going to be chewing up excess capacity."

Data out on tonight (AEST) include US ISM manufacturing data, which is expected to show further evidence of weakness in the US economy.

Mr Roberts predicts the dollar will prove pretty resilient for quite a while.

"Yes the US is important, but there are still quite significant parts of the world that are growing which are growing relatively fast," he said.

He cited strong Eurozone numbers recently and a lift in the Chinese performance of manufacturing index today.

Meanwhile the debt market was weaker at noon.

The yield on the Commonwealth Government April 2020 bond was 4.786, up from yesterday's close of 4.766 per cent, while the May 2013 bond was at 4.309, up from 4.242 per cent.

On the Sydney Futures Exchange, the September 10-year bond futures contract was at 95.220, down from yesterday's close of 95.240, while the September three-year bond futures contract was at 95.640, down from 95.700.