By Swati Pandey and Charlotte Greenfield
SYDNEY/WELLINGTON, Sept 5 (Reuters) - The Australian dollar edged towards one-month highs on Tuesday after upbeat data on exports and government spending bolstered views the country's economy rebounded smartly in the second quarter.
The Australian dollar AUD=D4 was hovering around $0.7960, up from Monday's $0.7943 and within sight of $0.7997 touched last week, the highest since Aug. 1.
It dipped briefly when the Reserve Bank of Australia (RBA) left interest rates at a record low of 1.50 percent, as expected, and again cautioned that a further rise in the currency would hinder economic growth.
However, the RBA also noted that recent data supported its forecasts for a gradual pick-up in growth this year.
Australia's net exports added 0.3 percentage points to GDP growth last quarter, when most analysts had expected a small subtraction, official figures showed on Tuesday. data showed government spending was surprisingly upbeat in the quarter, tilting the risks to the upside for the gross domestic product (GDP) report due on Wednesday.
"Better-than-expected net exports and government spending means Q2 GDP is likely to bounce strongly after last quarter's weather-affected read," said NAB economist Tapan Strickland.
He expected growth of 0.9 percent in the second quarter, revised up from an initial 0.6 percent. That would be a marked improvement on the first quarter's pedestrian 0.3 percent pace, and faster than even the United States.
Such an upbeat result could help offset geopolitical tensions which have been plaguing the Aussie in recent days. The currency is often used as a liquid proxy for risk in Asia.
The currency came under selling pressure after South Korean media, citing an unidentified intelligence source, said Pyongyang was seen moving what appeared to be an intercontinental ballistic missile (ICBM) towards its west coast. New Zealand dollar NZD=D4 was a shade firmer at $0.7177, from $0.7141 the previous day. The Kiwi was still near three-month lows after falling 4.5 percent in August amid jitters over the country's hotly contested election. tests lower on a TWI basis still look likely in time, especially with election uncertainty heating up," said Philip Borkin, senior economist at ANZ Bank, referring to the basket of currencies the New Zealand dollar is measured against.
The currency =NZD was already at four-month lows on a trade-weighted basis.
Investors will watch an auction due overnight for dairy, the country's largest goods export, with futures markets pointing to a price rise of around 3 percent.
New Zealand government bonds 0#NZTSY= eased, sending yields 1 basis points higher at the long end of the curve.
Australian government bond futures slipped in the wake of the strong domestic data, with the three-year bond contract YTTc1 down 5 ticks to 97.980. The 10-year contract YTCc1 fell 4 ticks to 97.3400. (Editing by Richard Pullin)