Aussie dollar drops as traders expect slow growth rates from United States and China

THE dollar opens marginally lower as traders await key data expected to show slow growth in both the United States and China.

At 7.00am (AEST) the Australian dollar was trading at 106.02 US cents, down slightly from 106.06 cents on Friday. Since 5.00pm (AEST) on Friday, the currency has traded between 105.33 US cents and 106.40 US cents.

The Australian dollar is marginally lower today as traders await key data from the United States and China, expected to show slow growth in both economies.

The currency reached 110.11 US cents on May 3, a record high since the currency was floated in December 1983.

GFT Forex director of currency research, Kathy Lien, said she expected the Australian dollar to trade within a tight range until around midday, when China releases a raft of economic data, including inflation and consumer spending figures for May.

Investors may also continue to sit on the sidelines until the US releases retail sales figures overnight, Ms Lien said.

"There's a good chance that both countries will report numbers that will be indicative of slow growth," she said.

"If that's the case, that could really deal a blow to risk appetite."

Regardless of the strength of the Chinese data, currency traders may decide to sell the Australian dollar, she said.

"I don't think that there's any winning scenario for risk appetite.

"If we get good Chinese data, that's going to raise concerns about how the central bank will need to tighten monetary policy, which could lead to slower growth.

"If we get weak data, that would be even worse because it means growth is already slow and that could translate into weaker demand from China."

The Australian Bureau of Statistics releases lending finance data for April today and the National Australia Bank publishes its monthly business survey for May.

Ms Lien said both pieces of data were secondary to the domestic currency.

"There's going to be a little bit of focus, maybe, on the business confidence numbers, but I think it's going to be the Chinese data that will set the mood.

She expected the Australian dollar to trade between 105 US cents and 106.40 US cents today.