950828

Australian dollar

takes a breather

before data deluge

SYDNEY: The Australian dollar ended a quiet day basically unchanged from its open, trading in a narrow range ahead of an avalanche of data over the next two days.

July current account and building approvals data and June quarter balance of payments data will be released on Tuesday, while Wednesday sees the release of June quarter gross domestic product and foreign debt, July retail trade and new motor vehicle registrations data.

At 0645 GMT the Australian dollar was at US$0.7425/30 from a local open of $0.7427/32 and $0.7423/28 late on Friday.

"It's biding time ahead of big numbers tomorrow and Wednesday," Steve North, chief dealer of corporate forex at Chase Manhattan said. "It's in wait and see mode."

The Australian dollars inactivity was reflected in the trade weighted index, which remained unchaged through the day from Friday's close of 53.1. On the crosses, the Australian dollar was at 71.55/65 yen and 1.0898/13 marks, from an open of 71.72/82 and 1.0921/32 and 71.41/51 and 1.0945/55 late Friday.

Of the next two day's data, the July current account and the GDP figures are seen as the most important to financial markets by economists and traders.

The July current account deficit is forecast to be A$2.4 billion, which would make it the second worst deficit on record after May's A$2.85 shortfall.

An expected improvement in the merchandise trade balance is expected to be more than offset by a worsening in the net income deficit, economists said.

In the aftermath of the May deficit, the Australian dollar fell to its lows for 1995 of around US$0.7070, and traders said another deficit above market expectations would be adverse for the currency.

Wednesday's GDP figures are expected to show economic growth rebounding to above four percent, after strong data last week led to an average forecast of 1.4 percent growth in the June quarter.

In the March quarter, GDP grew by 0.5 percent for an annual growth rate of 3.7 percent

Such growth, by adding to building inflationary pressures, would increase the likelihood of the next move in interest rates being an increase, economists said.

Such a move, by increasing interest differentials, would be favourable for the Australian dollar, they said.

Ahead of the data, however, traders expect the Australian dollar to be fairly quiet unless there are major moves in the U.S. dollar. A holiday in London would help to keep the currency quiet, traders said.

In Asian trade thinned by a Hong Kong holiday, the U.S. dollar was down from its New York closing levels. At 0715 GMT, the U.S. dollar was at 96.35/45 yen and 1.4685/90 marks, from 96.67/72 and 1.4705/10 at the New York close.

The mark benefitted from the resignation of French finance minister Alain Madelin, dealers said.-Reuter