AUTRALIA DOLLAR UP LATE, SPURRED ON BY BETTER ECON DATA

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* Friday, June 12, 2009 As of 2:49 PM (GMT +8 hours)
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* JUNE 12, 2009, 2:49 A.M. ET

Australia Dollar Up Late, Spurred On By Better Econ Data

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Rates At 0625 GMT
Latest Change
AUD/USD 0.8146 +0.5%
AUD/JPY 79.88 +0.6%
5.75% Apr, 2012 4.455% -0.062
5.25% Mar, 2019 5.555% -0.047
10-Yr Spread To U.S. +187 bps +7 bps
SFE Jun 3-Year Futures 95.59 +0.08
SFE Jun 10-Year Futures 94.465 +0.055


SYDNEY (Dow Jones)--The Australian dollar was stronger but off its heady peak late Friday as a confidence-driven run up in risk appetite was tempered by some profit taking.

Economic data, both domestic and offshore, have been broadly supportive of the Australian dollar this week.

In the offshore session, U.S. jobless claims fell while an advanced reading of retail sales showed strength in the U.S. sector, shoring up expectations about a recovery in global economic growth.

At 0625 GMT, the Australian dollar was quoted at US$0.8146 from US$0.8106 late Thursday. It hit a peak of US$0.8235 in the offshore session. Against the Japanese yen, it was at Y79.88 from Y79.42.

RBC Capital Markets Senior Currency Strategist Sue Trinh said a number of large trades in the Asian session have checked the advance of the high-yielding currencies.

"Kiwi and Aussie are the underperformers after being the outperformers yesterday," Trinh said.

She said the currency has struggled to hold above the psychologically important US$0.8200 mark.

The break of US$0.8170 in the Asian session suggests it could drop back down toward US$0.8000 in European and U.S. trade, Trinh said.

A potential driver for currency markets remains the Group of Eight summit in Italy this weekend.

Market participants are tuned in for any comments from policy makers at the summit about the recent weakness of the U.S. dollar.

"There's always speculation that these officials are going to try and talk the U.S. dollar higher because they don't like their own currencies being too strong but I'm doubtful they will," Trinh said.

Westpac strategists said news that the Commonwealth Bank of Australia has lifted its standard variable rate by 10 basis points on the back of higher funding costs weighed on the currency slightly.

"This has seen market interest rates fall as the market speculates whether this will prompt further Reserve Bank of Australia interest rate cuts," Westpac said.

Meanwhile, Australian bond futures have clawed back some of their losses from Thursday's trade with the three- to 10-year bond yield spread steepening slightly again to 112.5 basis points.

Commonwealth Bank of Australia Debt Strategist Jarrod Kerr said bond futures have tracked a rebound in U.S. Treasurys, which have been sought after yields hit fresh highs, making them particularly attractive for bargain-hunting investors.

NOTE: the australia bond in a future that have clawed back some of their losses from thur's day.

But he expects the three- to 10-year yield spread will widen again and suggests entering steepener trades if the spread falls back below 110 basis points.

June three-year bond futures rose eight ticks to 95.59 while 10-year futures rose 5.5 ticks to 94.465.

"I think the selloff in the front end has been a little too aggressive," Kerr said.

"Even though we've got a much more upbeat central bank governor and we will see more talk on how Australia's likely to outperform, I don't think the Reserve Bank of Australia is going to deliver on the rates hikes the market is pricing in over the next year."

-By Sam Holmes, Dow Jones Newswires;
61-2-8272-4686; samuel.holmes@dowjones.com
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(Data provided by Reuters)




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