The Australian dollar marched higher on Wednesday after data showed the economy grew at its fastest pace in a year last quarter, adding to the case against a rate cut in the near term. The Australian dollar jumped as much as half a cent to $0.7819 after data showed the economy grew 0.9 percent in the first quarter, topping forecasts of 0.7 percent. It had surged over 2 percent on Tuesday when long positions in the US dollar were squeezed out by a rally in the euro.
The Aussie also extended gains on the yen and pound and even outpaced a racy euro. The common currency eased to A$1.4302, from a two-month peak of A$1.4440 touched on Tuesday. "The pop above 78 cents is fully justified as it looks like the RBA (Reserve Bank of Australia) will be sitting on its hands for a while," said Ray Attrill, global co-head of FX strategy at National Australia Bank.
Futures markets dipped, but only modestly as they had already lengthened the odds on another cut in interest rates, at least in the near-term. Interbank futures imply a one-in-five chance of a cut by August, from 40 percent earlier this week, with the probability rising to 50 percent by Christmas. NAB's Attrill cautioned the Aussie could just as easily retreat to 77 cents as hit 80 cents depending on the outcome of the Greek debt crisis and Friday's US jobs report. For now, resistance is seen around $0.7830 and support near $0.7735.
The New Zealand dollar was holding around $0.7180 as it recovered from a near five-year low on Monday. New Zealand government bonds mirrored the broader global sell off, with yields as much as 8 basis points higher at the long end of the curve. Australian government bond futures fell sharply, with the three-year bond contract off 11 ticks at 97.950. The 10-year contract was down 15.5 ticks to 97.1050.
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