Forex - Australian dollar spikes after Q4 GDP beats expectations

The Australian dollar spiked higher in Asia on Wednesday after fourth quarter GDP rose more than expected and after a private think tank said the services sector entered expansion for the first time since January 2012.

AUD/USD traded at 0.8984, up 0.36% from flat beofore the data and USD/JPY traded flat at 102.21, down 0.01%.

In China, attention is focused on the yuan and the opening of China's National People's Congress that runs until March 13. In comments today, China's premier said the country woud expand the yuan floating rate.

Australia Q4 GDP data showed a gain of 0.8%, above expectations for a gain of 0.7% quarter-on-quarter and also rose 2.8% at an annual pace, compared to expectations of 2.5% year-on-year.

Earlier, Australia's AI Group Services Index rose 5.8 points to 55.2 in February, moving into expansion for the first time since January 2012.

The dollar softened Tuesday against most major currencies amid demand for risk-on asset classes fueled by ebbing fears of a Russian invasion of Ukraine, though the greenback later reversed those losses as markets looked past geopolitical concerns in eastern Europe.

Markets also applauded a Russian order for troops engaged in military exercises close to Ukraine’s borders to return to their bases.

Still, the safe-haven dollar enjoyed some support, as Russian forces still maintain a military presence in Crimea.

Meanwhile in Europe, the number of unemployed individuals in Spain declined unexpectedly in February, easing concerns over the health of the euro zone’s fourth largest economy, official data showed on Tuesday.

The dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was down 0.03% at 80.14.

On Wednesday, the U.S. is to release the ADP report on private-sector job creation, which leads the government’s nonfarm payrolls report by two days. Meanwhile, the ISM is to publish a report service sector activity.