Equity markets push dollar up

THE Australian dollar has risen from a six-week low, lifted by stronger regional equity markets and renewed trader interest.

THE Australian dollar has risen from a six-week low, lifted by stronger regional equity markets and renewed trader interest.

At 5pm (AEDT) today, the dollar was trading at 105.49 US cents, up from 105.25 cents yesterday.

Since 7am, the local unit traded between 105.11 US cents and 105.62 cents.

The local currency fell overnight to 104.74 US cents, its lowest level since January 25.

Commonwealth Bank currency strategist Joseph Capurso said the Australian dollar was one of several currencies lifted by stronger equity markets.

"It lifted a bit today, and I think that's following the equity market higher," he said.

"There have been increases in equity markets in China, Japan and Australia, so we've got a bit more risk appetite, and it's sent the Aussie the Kiwi and the Canadian dollar up as well."

Mr Capurso said the appetite for more risk could continue into the London trading session later today.

After that, a rates decision in the US by the Federal Open Market Committee (FOMC) would dominate market movements, he said.

"The FOMC is meeting tonight, and I suspect they might disappoint the equity and commodity market," he said.

"Some market participants are expecting that they might have an upgraded economic outlook - I can't see them doing that, despite the good payroll data.

"I think we'll see a fall in commodities and equities, and that will push the Aussie dollar down."

At 5pm, the Australian dollar was at 86.61 Japanese yen, up from 86.59 yen yesterday, and at 80.16 euro cents, down from 80.43 euro cents.

Meanwhile, Australian bond prices were slightly weaker amid a lack of economic data to influence trends.

At 4.30pm, the March 10-year bond futures contract was trading at 96.020 (implying a yield of 3.980 per cent), down from 96.030 (3.970 per cent) yesterday.

The March three-year bond futures contract was at 96.430 (3.570 per cent), down from 96.445 (3.555 per cent).

RBC fixed income strategist Michael Turner said there had been little in the way of important data or events to influence bond markets today.

"It's been a very quiet day, with a very tight range, and it's just a little bit softer," he said.

"There was (housing) data out at 1130 (AEDT) but it was largely ignored, it seems we're waiting for the next story to break offshore."

"We've got a few weeks left before the RBA (Reserve Bank of Australia) makes a decision (on cutting interest rates), so we're just treading water."

Mr Turner said the FOMC decision was likely to be a non-event, given last month's statement and speeches by US Fed chairman Ben Bernanke, who indicated another round of quantative easing was unlikely.

The Reserve Bank of Australia's trade weighted index was unchanged at 78.1 today.