The dollar has continued on the defensive in overseas markets as traders absorb the growing evidence of a slowing U.S. economy.

This morning's U.S.

Consumer Price Index for May came in below expectation at 0.1%, with the core rate up 0.2%. The year-on-year increase is 3.1%.

The most obvious overnight development was the boost given to the Australian dollar by the better-than-expected

GDP

data for the first quarter of this year. The

Bureau of Statistics

reported that economic growth in the quarter rose by 1.1% for an annual increase of 4.3%. These numbers were well above market expectation of 0.4% and 3.4% respectively.

"Some people have been getting too excited by the slowness of recent data and these data show that the economy is in reasonable shape," said Michael Derks of

Commonwealth Bank of Australia

.

Following this announcement, and a strong supporting statement by treasurer

Peter Costello

, the Australian dollar moved above 60 cents to open in New York at $0.6010.

Elsewhere, the dollar has also looked soft. Dollar/yen is now opening around 106.30 after briefly touching 107 earlier in the day. Euro/yen has held yesterday's better levels and is opening at 102.50.

The

Bank of Japan

monthly report continued to suggest that economic recovery was underway. The BOJ also decided to keep its "zero interest rate" policy in place for the foreseeable future.

The euro has also maintained its firmer tone of yesterday and opened higher, at $0.9640.

German

inflation

for May fell 0.1%, for a year-on-year increase of 1.4%.

Public sector unions

have voted to accept the government's latest pay offer and to avert a strike planned for Thursday.

Not everybody is yet convinced that the dollar is headed lower. "I expect the U.S. economy to do well and for these gains in the euro to be reversed at some point," said Derks.

As expected, the

Norwegian Central Bank

raised its interest rates by 50 basis points, to 6.25%, today.

Sterling has continued to soften and has given up yesterday's gains to open at $1.5050. The main focus continues to be the euro/sterling rate which has moved higher to 64.00 pence.

The pound was weakened by the news that U.K. average earnings increased by 5.1% for the last three months, below expectation of a 5.5% increase. This was seen as reducing even further the

Bank of England's

motivation to push interest rates higher.

Dollar/Swiss franc was steady at 1.6235. The euro/Swiss franc cross was steady, at 1.5650. The

Swiss National Bank

is generally expected to raise its interest rate target by 50 basis points at its meeting tomorrow.

The Canadian dollar opened around yesterday's close at C$1.4700.

The New Zealand dollar has benefited from the Aussie's strength and opened 20 points better, at $0.4745.

The South African rand was edging modestly higher to open at 6.98.

The Mexican peso was unchanged at 9.78.