Dollar lifts as GDP eyed

The local unit is firmly above US72c as pundits lift expectations for tomorrow’s GDP print.

The Australian dollar was the strongest performing currency in Asia on Tuesday, after strong first-quarter balance of payments data prompted hefty upward revisions to economic growth forecasts.

At 5.45pm (AEST) on Tuesday, the Australian dollar was trading at US72.37 cents, compared with US71.82c at the same time on Monday.

Economists scrambled to revise higher their forecasts for first-quarter gross domestic product growth after news that big increases in the volume of iron ore and liquefied natural gas exports would add significantly to the expansion.

So-called net exports will add 1.1 percentage points to GDP growth in the first quarter, the Australian Bureau of Statistics said Tuesday. The GDP data will be published Wednesday.

A survey after the data of 10 economists by the Wall Street Journal showed an expectation that GDP growth would show a rise of 0.9 per cent in the first quarter, well up from 0.6 per cent expected at the start of the week.

The forecast implies the economy will show growth of close to 3.0 per cent on-year, enough to keep the unemployment rate headed lower over time, and potentially sidelining the Reserve Bank of Australia for now.

Some economist said the economy could show on-year GDP growth well above 3.0 per cent.

“Today’s data will give the Reserve Bank policymakers some extra time to assess the next move,” said Craig James, chief economist at Commsec.

“Ordinarily data similar to that released today would cause analysts to tip rate hikes, rather than rate cuts. But at present deflation and disinflation are upper most in policymaker minds, here and abroad,” he added.

Dow Jones newswires