Dollar up on strong Chinese data

THE dollar rose more than one US cent after trader sentiment was buoyed by the publication of stronger than expected economic growth in China.

THE dollar rose more than one US cent after trader sentiment was buoyed by the publication of stronger than expected economic growth in China.

The world's second-largest economy grew by 8.9 per cent in the three months ending in December, official Chinese data today showed.

Although it was the slowest growth rate in 30 months, it beat economists' forecasts of an 8.7 per cent pace.

"It (China) is slowing down but it's not slowing down very much, that's the main story we get out of today's data," said Commonwealth Bank currency strategist Joseph Capurso.

Mr Capurso said the Chinese data helped lift the Australian dollar to almost 104 US cents during intraday trade, from a low of 103.03 early today.

"That (data) came out about 1pm and just kept powering the Aussie dollar higher," he said.

At 5pm (AEDT) the local currency was trading at 103.89 US cents, up from 102.79 yesterday.

The Chinese data helped reverse negative sentiment that followed ratings agency Standard and Poor's decision to downgrade the credit ratings of nine eurozone countries, including France, on Friday.

Mr Capurso said developments in Europe were likely to dominate the Australian dollar's movement in overnight trade.

He said he expected the local unit to remain within the 101 to 104 US cent range it had traded within since mid-December.

"The main story is still the European story and that is going to weaken the euro and sap investor risk appetites.

"That is something that will keep a cap on the Aussie."

The local currency also gained ground against the Japanese yen and remained near a record high against the Euro.

At 5pm (AEDT) it was trading at 79.67 yen, up from 78.97 yen on Monday and 81.59 euro cents, up from 81.25 euro cents.

Meanwhile, Australian bond future prices fell today.

Aberdeen Asset Management portfolio manager Stuart Dear said the muted response in Europe to the credit downgrades helped unwind negative sentiment.

"Similarly risk assets did pretty well."

However, he said the Chinese data had minimal impact on bond markets

"It was more or less in line with expectations but not softer than expectations," he said.

At 4.30 (AEDT) today, the March 10-year bond futures contract was trading at 96.150 (implying a yield of 3.850 per cent), down from 96.270 (3.730 per cent) on Monday.

The March three-year bond futures contract was at 96.790 (3.210 per cent), down from 96.890 (3.110 per cent).

The Reserve Bank of Australia's trade weighted index was 77.1, up from 76.6 yesterday.