Dollar up on renewed risk appetite

THE dollar followed the positive sentiment on the local equity market to finish the day around one US cent firmer.

THE dollar followed the positive sentiment on the local equity market to finish the day around one US cent firmer.

At 5pm AEST today, the Australian dollar was trading at 107.37 US cents, up from 106.41 US cents yesterday.

Since 7am AEST today, the local unit traded between 107.12 US cents and 107.49 cents.

"(The Australian dollar) has been relatively firm through the course of the day and that's been in line with what's been the strongest lift in the equity market here in seven months," Nomura chief economist Stephen Roberts said.

The benchmark S&P/ASX200 index closed 81.6 points higher, or 1.83 per cent, at 4549.7, while the broader All Ordinaries index was up 79 points, or 1.74 per cent, at 4618.4.

Mr Roberts said risk appetite rebounded overnight after US President Barack Obama endorsed a plan put forward by a bipartisan group of senators to end the standoff over the US government's debt limit.

"Everybody has been quite negative because of the various stories which have been developing over the last few weeks," Mr Roberts said.

"So, it's not surprising that there's been a rebound, running through risk markets."

Good US economic data released last night and solid profit earnings results also gave support to risk assets, like the Australian dollar, Mr Roberts said.

US existing home sales data for June due overnight may generate some interest, he said.

"It would be interesting to see whether that shows a reasonable lift as well."

Mr Roberts said he expected the Australian dollar to trade above 107 US cents during the offshore session.

The RBA's trade weighted index was at 77.3, up from Tuesday's close of 76.7.