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Reuters Australia
Aussie dollar stalls on recovery doubts; bonds firm
Wednesday July 1, 07:09 PM
* Aussie retreats as mixed economic data dampens risk demand
* RBA seen holding rates at 3 percent on July 7
SYDNEY, July 1 (Reuters) - The Australian dollar retreated from intra-day highs on Wednesday as a mixed bag of economic data at home and abroad cast doubt on the strength of a global recovery, tempering demand for riskier assets.
The Aussie AUD=D4 retreated to $0.8034, from an intra-day high of $0.8078, and down from $0.8136 seen here late Tuesday. It was steady on the yen at 77.66 yen AUDJPY=, compared to Tuesday's 77.86.
The local dollar is now hovering in the middle of a range of $0.7790-$0.8265 that has held since late May. Charts show it is supported at around $0.7985, with resistance around $0.8155.
Domestic data showed retail sales jumped 1 percent in May, twice the market forecast, but other data showed approvals to build new homes slumped 12.5 percent in May, confounding forecasts for a 3.3 percent rise. [ID:nSP479300]
On balance, the data was seen backing market speculation the Reserve Bank of Australia (RBA) will keep rates steady at a record low of 3 percent at its next policy meeting on July 7, with any rate hikes likely to be later rather than sooner.
"We continue to see the RBA on hold from here, but with the first hike in rates not until early 2011," UBS economists said in a research note.
Australia's overnight index swaps AUDOIS show investors are betting the RBA will hold rates steady at 3 percent next week.
Analysts said mixed data from abroad dragged on the Aussie too, and knocked Asian stock markets lower.
Japanese business sentiment improved less than expected in June, while China's official purchasing managers' index edged up to 53.2 in June, from 53.1 in May. [ID:nSP514345]
Although the Chinese data showed the manufacturing sector is still expanding, some analysts said they had expected a stronger reading.
"There's some opportunistic selling. China's data was a little bit disappointing," said Katie Dean, an ANZ analyst. Going into the third quarter, we expect the Aussie to pull back to between $0.7650-$0.7950 as there will be consolidation in the global economy," Dean said.
Australian bill and bond futures firmed as the weak local building approvals data offered support.
The September bill future contract YBAc1 rose 0.05 points to 96.84.
Three-year bond futures YTTc1 added 0.05 points to 95.30, while ten-year bond futures YTCc1 rose 0.02 points to 94.52.
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