Dollar remains higher at noon

THE dollar remained higher at noon after the release of balance of payments and capital expenditure figures for the June quarter.
At 12pm (AEST), the Australian dollar was trading at $US0.8194/99, up from yesterday's close of 0.8100/03.

During the morning session, it traded between a low of $US0.8175 and a high of 0.8241.

ABN AMRO currency strategist Gregg Gibbs said Australian dollar movements were relatively muted today following steep gains overnight, with the currency edging slightly lower from its opening level of $US0.8216/19 during the morning session.

The Australian dollar rose sharply overnight as confidence returned and the US stock market recovered the previous day's losses.

The Dow Jones Industrial Average jumped 247.44 points, or 1.90 per cent, to 13,289.29, while the Standard & Poor's 500 index climbed 31.4 points, or 2.18 per cent, to 1463.76.

"It's not really doing a great deal today to suggest that it is trading on the back of anything in particular," Mr Gibbs said.

He said financial sector news could be preventing the Australian dollar from further gains.

Adelaide Bank recently increased its interest rate for low-doc mortgages by 30 basis points, while Australian hedge fund manager Basis Capital filed for US bankruptcy protection for one of its funds exposed to US sub-prime mortgages.

"That might be keeping the market a little bit wary of the financial stress developing around the world," he said.

Mr Gibbs said strong capital expenditure figures released today could add to Australian dollar support.

New private capital expenditure rose 6.3 percent in real terms, seasonally adjusted, in the June quarter, which was better than expectations of a two per cent gain.

Meanwhile, the current account deficit widened to $15.998 billion in the June quarter, from $15.545 billion in the March quarter.

The median market forecast was for a deficit of $15.7 billion.

Mr Gibbs said the Australian dollar would this afternoon likely keep to its trading range of the last 24 hours between $US0.8126 and 0.8235.

The Australian bond market remained weaker at noon after tracking US Treasuries overnight as investors went seeking riskier assets amid the sharp rise in US stocks.

At 12pm, the yield on the Commonwealth Government February 2017 bond was at 5.945 per cent, up from yesterday's close of 5.863 per cent, while the August 2010 bond yield was at 6.210 per cent from 6.140 per cent.

The September 10-year bond futures contract was at 94.060, down from yesterday's close of 94.130, while the three-year contract was at 93.800 from 93.865.

At 12pm, the Reserve Bank of Australia's trade weighted index (TWI) was at 66.1, up from yesterday's close of 65.2.