Australian dollar jumps as weak GDP discounted
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Foreign Exchange

Australian dollar jumps as weak GDP discounted

The Australian dollar was the standout currency early on Wednesday, after a weaker-than-expected report of economic growth was dismissed by investors as a temporary aberration caused by floods and cyclones.

The Australian Bureau of Statistics reported on Wednesday that the nation's first quarter gross domestic product declined 1.2 percent compared to the fourth quarter of 2010.

“The numbers came in slightly worse than expected but the internals on the report were pretty good, and the dollar has been strong through the session,” said Michael Turner, a strategist at RBC Capital Markets in Sydney. “Rates have been selling off since the data was published,” suggesting investors were raising bets on interest rate rises.

The Reserve Bank of Australia, which kept its key interest rate unchanged at 4.75 percent for the past five meetings, will meet on June 7. The Australian dollar rose to $107.50, up nearly 70 cents from its level before the GDP numbers were released.

Natural disasters, including flooding in Queensland and an earthquake in Japan, led to the slowdown in growth, which should rebound strongly in the next quarter, said Australian Treasurer Wayne Swan.

Elsewhere, the euro was little changed against the dollar, consolidating recent gains, as investors shrugged off report on Tuesday that US consumer sentiment fell to the weakest level in six months, as home prices fell.

“We may be seeing some bad news fatigue,” Turner said. The euro was little changed against the dollar, trading around 20 cents higher at $1.4430, near a three-week high.

The euro has gained in recent days, paring recent declines, as investors bet the European Union is close to agreement on a package to prevent a Greek government debt default.

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