Aussie recovers from 2-week lows on domestic cheer

* Robust domestic data adds to talk rates have bottomed

* Government bonds trim sharp offshore gains

SYDNEY, July 3 (Reuters) - The Australian dollar recovered almost a cent on Friday from near two-week lows struck offshore as robust domestic data helped offset fresh doubts on the global recovery following gloomy U.S. jobs data.

While the jobs report from the U.S. weighed down on stocks and commodities globally, data at home showed demand holding up remarkably well, feeding into talk the Reserve Bank of Australia (RBA) would keep rates unchanged at 3 percent on July 7. [nSYD516514]

Private sector data on Friday showed Australian vehicles sales surged to their third highest ever in June while services sector activity boasted the first expansion in 15 months. [nSYD534265].

Earlier in the week, official data had shown retail sales rising at a healthy pace in May, adding to the view that the Australian economy was broadly recovering having dodged a recession in the first quarter.

"The recent run of economic data has emphasised Australia's relative economic and financial health," said Michael Blythe, chief economist at Commonwealth Bank of Australia.

"Overall, we see the Aussie reaching $0.84 by end-2009. There are a few hurdles that may temporarily side-track the recovery in the Aussie. While the world economy appears to be stabilising it is by no means out of the woods yet."

By 4:15 p.m. (0615 GMT), the Aussie AUD=D4 was at $0.7989, down from $0.8045 late here on Thursday, but off a near two-week low of $0.7900 struck offshore. The local dollar climbed as high as $0.8156 earlier this week.

The Aussie also recouped some of its sharp losses against the yen AUDJPY=R, trading at around 76.78 yen by Friday evening. It had dived to 75.77 yen, its lowest since June 24, as leveraged positions were unwound after the dismal U.S. jobs report.

A poll showed the Aussie is expected hold its ground at 80 U.S. cents in the next month, underpinned by speculation that rates at home have bottomed. At 3 percent, the cash rate is amongst the highest in the developed world.

Markets are already pricing in rate hikes by the central bank in the next year CSRBA1Y=CSAU, with investors confident about Australia's economic outlook mainly due to its closer ties with healthier Asian economies. [nSYD392864].

Australian bond futures were higher as investors sought the safety of fixed income, but pared some of their sharp gains towards the end of the local trading session.

Three-year bond futures YTTc1 added 0.08 points to 95.48, while ten-year bond futures YTCc1 were flat at 94.60, having risen to 94.715 earlier in the day.

They underperformed Treasuries with the gap between U.S. and Australian 10-year bond yields widening to 205 basis points from 197 points on Thursday. ... read original article
Fri 3rd July 2009 - 04:55pm