$A up on US stocks, ahead of Chinese PMI

Reported by AAP
Friday, March 30, 2012
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The Australian dollar has risen after a good performance in US stocks overnight.

At 1700 AEDT on Friday, the local currency was trading at 103.95 US cents, up from 103.63 cents on Thursday.

From 0700 AEDT, the Australian dollar has traded between 103.55 US cents and 104.15 cents.

RBC currency strategist Michael Turner said the local currency had not moved much on Friday.

"It's been a pretty uneventful session," he said.

"There was a decent bounce off the lows overnight, the US stocks had a pretty reasonable recovery, we just couldn't get on with it today."

Mr Turner said the market would be watching for Chinese purchasing managers' index (PMI) data, due for release on April 1.

"I think everyone's waiting to see what this PMI 's got to say on the weekend," he said.

"Once we saw the HSBC Flash PMI print reasonably soft, China did come back into the headlines again."

Mr Turner said a meeting of euro zone finance ministers over the weekend would be important, but unlikely to move the market.

The local unit was at 85.12 Japanese yen, down from 85.65 yen on Thursday and at 77.88 euro cents, up from 77.81 euro cents.

Meanwhile, Australian bond prices were slightly higher.

At 1630 AEDT on Friday, the June 10-year bond futures contract was trading at 95.965 (implying a yield of 4.035 per cent), up from Thursday's close at 95.945 (4.055 per cent).

The June three-year bond futures contract was at 96.550 (3.450 per cent), up from 96.500 (3.500 per cent).

ANZ senior economist Shane Lee said Australian bond prices had been on a stronger trend in the last few days, as the market looked at the possibility of a slowdown in China, and a rate cut by the Reserve Bank of Australia (RBA).

"The curve's definitely steepened in the last day or two," he said.

"It's been pushing up, and if the RBA cuts rates next week, it could go a lot higher."

Mr Lee said negative headwinds from China made a strong case for the RBA to cut rates at least once this year.

"There's definitely a downward bias on rates, for May at least," he said.

"The banks took the view that the US recovery is pretty robust now, and even if you do get a dip in payrolls in one month, they'll still think the recovery's got legs.

"But China's possibly another kettle of fish for them - they just need one bad number there, and the bank might have to change their mind on it."

An AAP survey of 15 economists showed none of them expected the central bank to move rates from their current setting of 4.25 per cent at its meeting on April 3.

The Reserve Bank of Australia's trade weighted index was unchanged at 76.9.

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