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Aussie dollar set to log best quarter in over 25 yrs
Tuesday June 30, 06:55 PM
* Australian dollar jumps 17 pct in quarter
* Optimism about global recovery and higher commodities help
* Yield differentials over U.S. bonds rise
SYDNEY, June 30 (Reuters) - The Australian dollar was on track for its best quarterly performance since at least 1983, bolstered by higher stocks and commodities amid renewed optimism that the worst of the global economic downturn is over.
The Aussie rose to its highest in more than two weeks on Tuesday as Asian stocks advanced, as did oil and metals, all combining to boost appetite for the commodity-linked currency.
"We expect the Aussie to rise to $0.89 by June next year as the world economy recovers," said Joseph Capurso, strategist at Commonwealth Bank.
By 4:20 p.m., the Aussie AUD=D4 was at $0.8136, up from $0.7989 late here on Monday and well above last week's $0.7790 low. It rose to as high as $0.8148, its highest since June 12 and has gained 17 percent in April-June quarter
Against the yen, the Aussie advanced to as high as 78.13 yen AUDJPY=R, its best since June 19, as better risk appetite encouraged demand for leveraged carry trades.
Figures out of Japan on Tuesday showed June manufacturing PMI rose to a one-year high, with the index rising for a fifth straight month. [nTKC003382]. Japan is the single biggest importer of Australian resources, so the data also bodes well for the Aussie.
The domestic economic calendar picks up on Wednesday with May retail sales and buildings approvals due.
So far, demand in the economy has held up pretty well. Australian department store retailer David Jones Ltd (ASX: DJS.ax) raised its full-year profit forecast on Tuesday due to a strong trading performance in May and June.
"We expect the influential Australian retail sales and building approvals to post strong results," Capurso added. "Low interest rates are supporting spending and a housing recovery."
Better-than-expected data could add to speculation that benchmark interest rates have hit a bottom at 3 percent, well above those in other developed nations, further supporting the Aussie.
Australian bond futures were lower, as higher stocks curtailed demand for safe-haven assets and investors adjusted their books ahead of the financial year-end.
Three-year bond futures YTTc1 were 0.04 points lower at 95.24, while 10-year bond futures YTCc1 lost 0.04 points to 94.49.
Local 10-year cash yields remained a sizable 213 basis points over U.S. yields, near the widest spread in 11 months, on a view official rates here will rise before those in the United States.
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