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Reuters Australia
Aussie dlr eases ahead of key U.S. jobs, bonds up
Thursday July 2, 07:05 PM
* Aussie pulls back from intra-day highs; awaits U.S. jobs
* Aussie's seen to be stuck in range trade in near term
SYDNEY, July 2 (Reuters) - The Australian dollar retreated from intra-day highs on Thursday as investors awaited for a key U.S. jobs report, though it remains lodged in a range held for the past month.
The Aussie was steady at $0.8045, compared to $0.8034 seen here late Wednesday but off a $0.8096 high. It was subdued against the yen at 77.71 yen AUDJPY=, against 77.66.
It took a knock from weak Australian trade data, which followed disappointments on building approvals and credit.
The trade deficit widened to A$556 million in May, more than four times the size of the forecast A$125 million, and compared to April's A$282 million. [ID:nSYD469172]
Some analysts said lower prices for key commodity exports in the coming months could weigh on business investment, profits, employment and tax receipts.
That should signal Australian rates are not likely to rise anytime soon, said Su-Lin Ong, an analyst at RBC Capital Markets.
"The generally mixed nature of the numbers this week provides a reality check for markets that continue to price in rate hikes in early 2010," she said.
Australia's yield curve has steepened in the past week as shorter-term yields rose, perhaps a reflection of expectations that rates are not likely to rise in the near future.
Three-year bond futures YTTc1 added 0.08 points to 95.40, while ten-year bond futures YTCc1 rose 0.095 points to 94.615.
The spread of ten-year local cash yields over three-year yields stood at 112 basis points, up from a five-month month low of 106 basis points struck on June 26.
In the very short term, U.S. payrolls numbers for June due later on Thursday could move yields and the Aussie. Median forecasts are for a fall of 363,000 and anything stronger could lift the U.S. dollar and global yields. ECONUS
Without a jolt, analysts fear the Aussie was likely to stay within a range of $0.78-$0.82 as these levels were in line with commodity prices and interest rate differentials, or the yield premium Australian bonds offer compared to overseas bonds.
"One catalyst for a break-out of this range is likely to come from central banks," said Joseph Capurso, a currency strategist at Commonwealth Bank.
"If the Reserve Bank of Australia (RBA) changes from an easing bias, it will trigger some upside in the Aussie," he said. The RBA holds its next policy meeting on July 7.
Local two-year bond yields are 281 basis points over U.S. two-year yields, and the Aussie's three-month correlation with the spread stands at a firm 0.84, a sign the Aussie is fairly valued at around $0.80, Capurso said.
The RBA said this week its index of commodity prices fell an estimated 4.9 percent in Aussie dollar terms in June. In comparison, the Aussie has lost 2.7 percent since hitting an eight-month high of $0.8265 on June 3.
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