Dollar brushes off RBA concerns

The Australian dollar closed higher on Friday higher despite the Reserve Bank's weaker outlook for economic growth.

The Australian dollar closed higher on Friday higher despite the Reserve Bank's weaker outlook for economic growth.

The currency was trading at US91.40¢ late in the session, up from US90.88¢ on Thursday.

Easy Forex currency dealer Milica Nikolic said the dollar dipped after the release of the Reserve Bank's quarterly statement on monetary policy, which downwardly revised its forecasts for growth in the economy this year.

"The RBA reduced the growth forecasts for the economy so the Aussie pulled down but then immediately bounced back up," Ms Nikolic said. "It looks like we've run out of sellers."

The local currency was also given a boost following positive retail, manufacturing and mining data from China. Industrial production growth accelerated last month to a five-month high of 9.7 per cent year-on-year, the Chinese government said.

Industrial production, which measures output at factories, workshops and mines and is a key indicator for the world's second-largest economy, also rose 9.4 per cent over the first seven months of this year.

Meanwhile, bond futures prices were lower after Chinese inflation held steady at 2.7 per cent, potentially leaving room for the government to stimulate the economy.

Nomura head of macro products, Jon Linton, said bond prices were pushed lower after the inflation data fell in line with expectations.

He said the RBA's quarterly statement on monetary policy had been interpreted in different ways, with some saying it maintained an easing bias while others interpreted it as hawkish.

"By and large, it was pretty much as expected, but maybe the market had been looking for a few clearer hints from the RBA about monetary policy," Mr Linton said. "Our market is going to be dragged around by what goes on overseas for the next couple of weeks."

The September 10-year bond futures contract was trading at 96.280 (implying a yield of 3.720 per cent), down from 96.320 (3.680 per cent) on Thursday. The three-year contract was at 97.420 (2.580 per cent), down from 97.460 (2.540 per cent).

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