Dollar edges back from 10-week high

The local unit has edged back in late afternoon after touching a fresh 10-week high.

The Australian dollar has climbed to a fresh 10-week high Friday on better news from China’s economy.

At 4.05pm (AEST), the Australian dollar was trading at US76.25 cents, slightly down from US76.32c late on Thursday as investors took profits.

Earlier in the session, it had touched US75.76 cents, its best price in 10 weeks.

It began the week trading at US75.20c.

Chinese growth held steady at 6.7 per cent in the second quarter, as record stimulus lent some stability to a slumping economy.

China’s National Bureau of Statistics said industrial output rose 6.2 per cent in June from a year earlier, accelerating from May’s 6.0 per cent growth.

ANZ economist Raymond Yeung said the pace of economic activity in China had forced a small upward revision of the bank’s forecasts for GDP in the world’s second-largest economy.

Still, he said there are still headwinds building, not least of which is a likely slowdown linked to the UK’s exit from the European Union.

“Brexit is expected to affect exports negatively. Secondly, the floods in the Yangtze River Economic Belt will drag the economic activities of the four most affected provinces, representing around 20 per cent of China’s GDP,” he added.

Next week will bring Australian second quarter inflation data, which is set to determine if the Reserve Bank of Australia cuts interest rates at its August 2 policy meeting.

A low result will see bets on a cut of the cash rate target, now at 1.75 per cent, in August, rise sharply.

The RBA indicated at the start of the month that it is now watching data closely to see if rates need to be changed. Prior to that it held a neutral view on the outlook. It last cut in May after a report showing ultra-benign inflation in the first quarter.

Recent solid employment data and signs house price growth is gathering momentum argue against a cut in interest rates, economists said.

“Our assessment remains that the RBA will cut rates again next month but with okay economic data it’s dependent on another low June quarter inflation reading,” said Shane Oliver, chief economist at AMP Capital.

- Dow Jones newswires