Dollar strengthens in late trade

The local unit is supported by expectations of a strong GDP print, and ebbing fears of an imminent Fed hike.

The Aussie dollar will likely remain supported by GDP data this week.

The Australian dollar was stronger in late trade on Monday, with traders sensing there was no “smoking gun” in Friday’s US employment data to signal an imminent Fed interest rate hike.

A US rate rise would likely see the US dollar strengthen against a broad basket of currencies including the Australian dollar.

Sean Callow, senior currency strategist at Westpac said the US non-farm payrolls report did not settle the debate over the intentions of the Fed, leaving in place confidence around a strong Aussie dollar near-term.

The US economy created 151,000 new jobs in August, a solid result, but still short of the 181,000 expected by the markets.

Late in Asia trading, the Aussie dollar was trading just above US76.00 cents, compared with US75.39c late on Friday.

By contrast to the US monetary policy debate, most economists expect the Reserve Bank of Australia to cut interest rates further in the next year as inflation remains stubbornly low.

A policy meeting of the RBA on Tuesday is not expected to see that cut, with policy makers content to sit on the sidelines having cut at the start of August.

Wednesday will bring second quarter GDP growth data, with economists forecasting a growth of 3.0 per cent or more on-year. Australia’s problem is not growth, it is weak commodity prices, incomes and low inflation.

Earlier, strong company profits, wages and inventories data prompted economists to nudge up expectation for second quarter GDP growth. The improved incomes data reflected a 14.2 per cent increase in mining profits, the largest quarterly gain in five years helped by a rebound in commodity prices.

Still, with balance of payments data for the quarter due on Tuesday, there is a risk of further revisions to growth forecasts. Exports have been a strong contributor to growth in recent quarters as iron ore and natural gas production booms.

Elias Haddad, senior currency strategist at CBA, said the Aussie dollar will likely remain supported this week because the GDP data will likely show growth at an above annual trend pace.

“With the economy growing at an above trend pace the RBA has time to wait,” Mr Haddad said.

- Dow Jones newswires