Dollar bounces back in morning trade

THE Australian dollar was higher at midday, bouncing back from overnight lows, as robust capital expenditure date reinforced the view that economic growth was strong.

THE Australian dollar was higher at midday, bouncing back from overnight lows, as robust capital expenditure date reinforced the view that economic growth was strong.

At 12pm AEDT today, the local unit was trading at 100.50 US cents, up from yesterday's close of 100.23 cents.

Since 7am AEDT, the Australian dollar traded between 100.15 cents and 100.41 cents.

Nomura Australia chief economist Stephen Roberts said the Australian dollar has risen steadily throughout the morning.

"It's bounced back in the local session and we expect it to be hold that level for the remainder of the day," he said.

During the local session capital expenditure data was released showing a smaller than expected rise in business investment in the December quarter.

The data feeds into next Wednesday's gross domestic product (GDP) data for the December quarter.

Mr Roberts said the data underpinned the economic growth forecasts.

"Most of the rise was in plant and machinery equipment, so that will make a reasonable contribution to GDP," he said.

"We got the first estimate for 2011/12 and that's up 30 per cent," Mr Roberts said.

"Also there is a pretty high realisation factor on this one where it looks like there is a very strong lift in capital spending looking not too far ahead into 2011/12."

The local dollar had a slight fall overnight as armed opponents of Libyan President Muammar Gaddafi continued to expand their control over parts of the North African nation.

Libya produces almost two per cent of the world's oil and two oil companies, including the biggest energy producer in the country suspended production because of the deadly protests.

Tomorrow the US releases fourth quarter GDP, which Mr Roberts said should not hold any surprises.

Meanwhile, the Australian bond market was flat to weaker at noon.

At 12pm (AEDT) today on the ASX 24, the March 10-year bond futures contract price was 94.430 (implying a yield of 5.570 per cent), level with its close yesterday.

The March three-year bond futures contract price was at 94.840 (5.160 per cent), down from 94.870 (5.130 per cent).