The Australian dollar recovered almost a cent on Friday from near two-week lows struck offshore as robust domestic data helped offset fresh doubts on the global recovery following gloomy US jobs data.
At the local close, the Australian dollar was trading at $US0.8004, down from Thursday's close of $US0.8028, but off a near two-week low of $US0.7900 struck offshore. The local dollar climbed as high as $US0.8156 earlier this week.
While the jobs report from the US weighed down on stocks and commodities globally, data at home showed demand holding up remarkably well, feeding into talk the Reserve Bank will keep rates unchanged at 3 per cent when its board meets on Tuesday.
Private sector data on Friday showed Australian vehicles sales surged to their third highest ever in June while services sector activity boasted the first expansion in 15 months.
Earlier in the week, official data had shown retail sales rising at a healthy pace in May, adding to the view that the Australian economy was broadly recovering having dodged a recession in the first quarter.
"The recent run of economic data has emphasised Australia's relative economic and financial health," said Michael Blythe, chief economist at Commonwealth Bank of Australia.
"Overall, we see the Aussie reaching $US0.84 by end-2009. There are a few hurdles that may temporarily side-track the recovery in the Aussie. While the world economy appears to be stabilising it is by no means out of the woods yet."
The Aussie also recouped some of its sharp losses against the yen, trading at around 76.78 yen by Friday evening. It had dived to 75.77 yen, its lowest since June 24, as leveraged positions were unwound after the dismal US jobs report.
A Reuters poll showed the Aussie is expected hold its ground at 80 US cents in the next month, underpinned by speculation that rates at home have bottomed. At 3 per cent, the cash rate is among the highest in the developed world.
Markets are already pricing in rate hikes by the central bank in the next year, with investors confident about Australia's economic outlook mainly due to its closer ties with healthier Asian economies.
Australian bond futures were higher as investors sought the safety of fixed income, but pared some of their sharp gains towards the end of the local trading session.
Three-year bond futures added 0.08 points to 95.48, while ten-year bond futures were flat at 94.60, having risen to 94.715 earlier in the day.
They underperformed Treasuries with the gap between US and Australian 10-year bond yields widening to 205 basis points from 197 points on Thursday.
Reuters
