Dollar higher after positive RBA statement

DOLLAR was almost three-quarters of a US cent higher at noon, after a positive statement on the economy by the Reserve Bank (RBA).

THE dollar was almost three-quarters of a US cent higher at noon, after a positive statement on the economy by the Reserve Bank (RBA).

At 12.00pm (AEDT), the local unit was trading at 101.74 US cents, up from 100.00 cents yesterday.

Since 7.00am (AEDT), the local dollar traded between 101.41 US cents and 101.79 cents.

The dollar rose a quarter of a US cent in the 30 minutes after the release of the central bank's monetary policy statement at 11.30am (AEDT).

The RBA said the economy is expected to fully recover from the shock of the Queensland floods by the second half of 2011, as coal production in the Sunshine State recovers.

However, the central bank is wary that the rebuilding process could put broad-based, upward pressure on prices and wages and consequently interest rates.

RBC Capital senior economist Su-Lin Ong said it was a reasonably positive statement.

"Markets are focusing on this expected upward revision to growth for 2011," Ms Ong said.

"It talks about the improving global economy and the strength in this region.

"It also discusses the terms of trade, tighter labour market, business investment in Australia.

"The inflation forecast has been left unchanged such that inflation is expected to head towards the top of the target range over the next couple of years."

Ms Ong said the statement is consistent with the liklihood of the RBA raising the cash rate later in the year.

On Friday night (AEDT), US non-farm payrolls employment data will be released , with the market forecasting 125,000 to 140,000 new jobs added in January.

"The market is braced for a pretty decent number, so that's going to be the main focus this evening, Ms Ong said.

"I doubt if the Aussie (dollar) will come off tonight, a stronger US economy is really going to broaden the global recovery."