Australian Dollar Rises

The Australian dollar rose and bonds fell after a government report showed the economy grew double the pace economists expected in the first quarter, adding to pressure on the central bank to raise interest rates.

The currency climbed from near a three-week low against the U.S. dollar as traders increased bets the Reserve Bank of Australia will raise its 7.25 percent benchmark borrowing cost by a quarter-percentage point this year. Australian two-year government bonds fell the most in almost two weeks, increasing the yield premium over similar-maturity U.S. Treasuries to the widest in seven weeks.

The Australian dollar traded at 95.48 U.S. cents at 12:11 p.m. in Sydney from 94.92 cents immediately before the report was released and an earlier low of 94.88 cents. It traded at 95.24 cents late in New York and 95.94 late in Asia yesterday. The currency climbed to 100.46 yen from 100.04 yen late in Asia yesterday.

Gross domestic product rose 0.6 percent from the fourth quarter, when it increased a revised 0.7 percent, the Bureau of Statistics said in Sydney today.

Traders see a 100 percent chance the Reserve Bank will raise interest rates by a quarter-percentage point by year-end compared with 62 percent odds yesterday, 30-day interbank interest-rate futures contracts show.

Australian Dollar Rises, Bloomberg
6/3/2008 7:25:59 PM