Dollar loses ground on poor GDP data

THE dollar was trading lower at noon, following weaker than expected gross domestic product (GDP) figures.

THE dollar was trading lower at noon, following weaker than expected gross domestic product (GDP) figures.

At 1200 AEDT, the Australian dollar was trading at US95.83c, down from yesterday's close of US96.19c.

Since 7am, the local unit traded in a range between US95.49c and US96.21c.

At 11.30am, the Australian Bureau of Statistics reported that GDP had risen by a seasonally adjusted 0.2 per cent in the September quarter.

The median market forecast was for growth of 0.5 per cent in the September quarter, and an expansion of 3.4 per cent in the year to the end of September.

The local unit took an immediate hit on the disappointing economic data, dropping almost 0.5c.

IG Markets market analyst Cameron Peacock said Wednesday's weak GDP result has added to market expectations that another interest rate hike from the Reserve Bank of Australia wasn't imminent, causing a dip in the local unit's value.

"You also had (RBA governor) Glenn Stevens testifying last week, pretty much saying that rates were quite sufficient for the time being and I think the market's not factoring in a rate rise until maybe mid next year," Mr Peacock said.

"So the weaker GDP number and further rate hikes being priced out has led to a little bit of a pull-back in the Aussie dollar."

In overnight trading, US shares started the day poorly but recovered most of its losses after President Barack Obama and Republican lawmakers promised to seek a compromise before the end of the year on extending Bush-era tax cuts.

The euro briefly fell below $1.30 for the first time since mid-September after investors sold off government bonds from Spain, Portugal and Italy.

A bailout of Ireland's banks announced Sunday hasn't been enough to assuage worries that other weak European countries will also need to be rescued.

Meanwhile, the bonds market was slightly firmer at noon.

At midday on the ASX 24, the December 10-year bond futures contract was at 94.570 (implying a yield of 5.430 per cent), up marginally from yesterday's close of 94.560 (5.440 per cent).

The December three-year bond futures contract was at 94.990 (5.010 per cent), up from 94.960 (5.040).