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Reuters Australia

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Aussie dlr firm, bonds up; eyes trade data

Thursday July 2, 12:17 PM

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SYDNEY, July 2 (Reuters) - The Australian dollar was steady on Thursday, ahead of local May trade numbers where a small deficit is forecast as weaker commodity export prices offset a slump in imports.

* Trade numbers due at 0130 GMT, and forecasts are for a trade deficit of A$125 million ($100.8 million), although estimates ranged wildly from surplus of A$1 billion to a deficit of A$1 billion.

* Other key data out Thursday include U.S. jobs report for June, where 363,000 jobs are forecast to have been lost in that month, with unemployment rising to 9.6 percent from 9.4 percent in May. ECONUS

* Aussie also supported by news that China wants to debate the prospects of a new reserve currency at next week's Group of Eight meeting. Such a debate would probably take a toll on the U.S. dollar, the dominant reserve currency now.

* Aussie was firm at $0.8089, after rising offshore to as high as $0.8108, and compared to $0.8034 seen here late Wednesday. It rose against the yen too to 78.07 yen AUDJPY=, from Wednesday's 77.66.

* G8 sources said on Wednesday has asked to debate a new reserve currency at the G8 meeting in Italy, and that the issue may be referred to in the summit statement. [ID:nLAG003567]

* Some investors are worried balloning U.S. trade and fiscal deficits would take a toll on the U.S. dollar in the long run, diminishing its appeal as a reserve currency.

* But most analysts say the U.S. dollar will not lose its status as a reserve currency any time soon because no other government bond market is as liquid or as safe as the U.S. Treasury market.

* U.S. economic data showed on Wednesday any economic recovery is likely to be tepid due to a weak labour market. Data showed surprising weakness in private sector employment and soft auto sales, although manufacturing contracted at it slowest pace in nearly a year. [ID:nN01335756]

* The weak data supported comments from a Fed official that U.S. benchmark rates could remain low for an extended period of time. The comment boosted shorter-dated Treasury prices as investors unwounded expectations of rate hikes.

* Australian bond futures rose too. Three-year bond futures YTTc1 rose 0.08 points to 95.40, while ten-year bond futures YTCc1 rose 0.075 points to 94.595. (Reporting by Koh Gui Qing)

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