Dollar bounces back at midday

INVESTORS have rediscovered risk, after Dubai's surprise call for a "standstill" on paying back its $65.72 billion debt.

THE dollar was higher at noon, as investors rediscovered their appetite for risk, after Dubai's surprise call for a "standstill" on paying back its $US60 billion ($65.72 billion) debt until next year.

At 12pm AEDT, the dollar was trading at $US0.9151/53, up from Friday's close of $US0.9015/20.

On Friday, the dollar plunged two US cents, or by 2.19 per cent, as investors absorbed the news of Dubai's impending standstill on debt repayments.

Since 7am AEDT today, the local unit has traded between $US0.9098 and $US0.9160, according to IRESS data.

Commonwealth Bank associate economist Sara Hoenig said the local unit was being well supported during today's local session as Asian stock markets appeared to shrug off the effects of the Dubai announcement on Thursday.

"Dubai is probably the main driver of the Aussie," she said.

"But Asian equities have opened a little bit stronger, and that's following on from the lead European equities had on Friday evening.

"It's in line with with a recovery sentiment following Friday and Thursday evening's rather risk averse climate."

At 11.52am AEDT Japan's Nikkei 225 index was 2.22 per cent higher 9283.31 points, while the Korean KOSPI was 2.05 per cent higher at 1556.34 points.

During the domestic session the Australian Bureau of Statistics data showed that company gross operating profits, at current prices, fell 2.1 per cent in the September quarter, seasonally adjusted, and were down 19.6 per cent over the year.

The median market forecast was for gross operating profits to have fallen by 0.1 per cent in the September quarter.

Ms Hoenig said the data did little to the local unit.

"The Aussie was practically unchanged from when they came out," she said.

Ms Hoenig said investors would look ahead to tomorrow's domestic session, when the Reserve Bank of Australia is expected to make its final scheduled interest rate decision for 2009.

Market expectations have wavered between a 50 to 70 per cent chance of a 25 basis point rate rise when the bank's board announces its decision at 2.30pm AEDT tomorrow.

The overnight cash rate is currently at 3.5 per cent.

"That will be the main domestic event for the week," Ms Hoenig said.

"We're still keeping to the view that the RBA will raise rates by 25 basis points."