Aussie dollar rises on growth reports

THE Australian dollar climbed after a government report showed the economy expanded in the second quarter at a faster pace than economists had forecast.

The “Aussie” snapped a three-day decline against the greenback as Reserve Bank of Australia governor Glenn Stevens signalled a willingness to keep the developed world’s highest interest rates on hold.

The New Zealand dollar headed for its biggest advance in a week versus the US currency, as Asian stocks rose, supporting demand for higher-yielding assets.

Australia’s GDP expanded 1.2% from the first quarter, when it contracted a revised 0.9%.

“Australia is still growing more firmly than most parts of the developed world so that’s something that continues to work in the Aussie dollar’s favour,” said Jonathan Cavenagh, a strategist at Westpac Banking.

Traders also reduced bets on the prospect of lower central bank interest rates after Mr Stevens indicated the Reserve Bank may extend its current pause.

Policymakers yesterday held the benchmark rate at 4.75% for a ninth straight meeting.

“Periods of sudden increases in anxiety within international financial markets are moments when, if at all possible, it is good to be in a position to be able to maintain steady settings,” Mr Stevens said.

Chairman of the US Federal Reserve Ben Bernanke will speak on the US economic outlook today.

President Barack Obama is also to address Congress about measures to boost jobs.

“Rumour is going around about a potential fiscal stimulus from US president Obama, so that could be a positive for risk appetite and that will ultimately benefit the Australian dollar,” Mr Cavenagh said.