Australian dollar stronger at noon

THE Australian dollar is around one US cent higher as traders wait for eurozone leaders to announce a rescue package for the region's struggling economies.

THE Australian dollar is around one US cent higher as traders wait for eurozone leaders to announce a rescue package for the region's struggling economies.

A summit of European Union (EU) leaders on Sunday met to discuss plans to boost the firepower of the eurozone rescue fund - the European Financial Stability Facility (EFSF) - and backed proposals to recapitalise banks that would be hit by a massive writedown of Greek debt.

They also agreed to explore a re-opening of the core European Union treaty to cover closer eurozone integration, although non-euro states remain wary about moves that might leave them out.

Market watchers were now awaiting more concrete details on how EU leaders were planning to tackle the region's sovereign debt issues, expected on Wednesday.

ICAP senior economist Adam Carr said the general mood on currency markets was of optimism.

"I'm not really sure how to look at it,'' Mr Carr said.

"Is it growing optimism or is it just a retracement from the extraordinary pessimism that we've seen recently?

"It's a sign, at least, that the market is a bit more willing to take on risk.''

At 1200 AEDT, the Australian dollar was trading at 103.40 US cents, up from 102.43 cents on Friday.

The Australian Bureau of Statistics said on Monday Australia's producer price index (PPI) at the final stage of production rose 0.6 per cent in the September quarter for an annual rise of 2.7 per cent.

That compared with a 0.8 per cent rise in the June quarter.

Economists' forecasts had centred on a September quarter PPI rise of 0.8 per cent.

The PPI is a measure of inflation and can influence expectations for the all-important consumer price index (CPI) on Wednesday.

The Australian dollar barely reacted to the PPI data, Mr Carr said.

"The market generally doesn't react to the PPI as it has a pretty low correlation to the CPI.

"The number itself, in terms of its meaning for this Wednesday's CPI data is zero, basically.''

Meanwhile, Australian bond prices rose after the PPI data.

At 1200 AEDT on Monday, the December 10-year bond futures contract was trading at 95.495 (implying a yield of 4.505 per cent), up from 95.480 (4.520 per cent) on Friday.

The December three-year bond futures contract was at 96.140 (3.860 per cent), unchanged from Friday.

Both three and ten-year bond futures opened the trading day softer on hopes that eurozone leaders would soon announce a comprehensive plan to support that region's debt crisis.
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