SYDNEY (Reuters) - The Australian dollar jumped to a three-week high on Tuesday following strong economic data and a rally in the price of iron ore, the country's top export earner.
The Australian dollar <AUD=D4> climbed as high as $0.7651, a level not seen since Nov.13.
Data out on Tuesday showed Australia's retail sales rose 0.5 percent in October, when analysts had looked for a 0.3 percent gain.
Separate data from the Australian Bureau of Statistics (ABS) showed the country's A$1.7 trillion economy likely accelerated at 3 percent annual growth last quarter.
And, iron ore was set for its fifth straight day of gains with Dalian futures <DCIOcv1> at the highest since September.
All good news for the Reserve Bank of Australia (RBA) which is hoping for a stronger pick up in economic growth and inflation as it left interest rates at a record low 1.50 percent for a fifteenth straight meeting. [AU/INT]
Gross domestic product data is due Wednesday.
"Tomorrow brings another piece of the puzzle, in the form of the Q3 GDP print," said Paul Bloxham, Chief Economist for Australia and New Zealand at HSBC. "This would be an above trend pace of growth and we expect growth of over 3 percent to continue in coming quarters."
The RBA also sounded more relaxed about the level of the Australian dollar, saying the currency remains within the range seen over the past two years.
That compares with the November statement when it said: "The higher exchange rate is expected to contribute to continued subdued price pressures in the economy. It is also weighing on the outlook for output and employment."
The Aussie has fallen about 5 percent since hitting a more than 2-year peak of $0.8125 in September largely due to a rebound in the U.S. dollar.
Across the Tasman Sea, the New Zealand dollar <NZD=D4> rose 0.6 percent to $0.6904 following a speech by Reserve Bank of New Zealand (RBNZ) governor Grant Spencer.
Spencer said on Tuesday the RBNZ has adopted a flexible approach to inflation targeting as it grappled with low global price growth.
"What he's saying right now is they're conscious that there's this lingering softness in the imported side of the inflation picture but they're not in any rush to cut rates which...gave the dollar a boost," said Satish Ranchhod, senior economist at Westpac Bank.
Nevertheless, Spencer cautioned the RBNZ might ultimately have to cut rates again should non-tradable inflation fail to accelerate in late 2018, as forecast in its November monetary policy statement.
Australian government bond futures slipped, with the three-year bond contract <YTTc1> down 5.5 ticks at 97.980. The 10-year contract <YTCc1> eased 5 ticks to 97.39.
(Editing by Simon Cameron-Moore)
