Chinese economic data boosts dollar

THE dollar was firmer at noon and was heading even higher, following Chinese economic data which showed official inflation had hit its highest level in nearly three years.

THE dollar was firmer at noon and was heading even higher, following Chinese economic data which showed official inflation had hit its highest level in nearly three years.

At noon (AEST), the dollar was trading at US106.11c, up from US106.06c on Friday.

Since 7am today, the local unit traded between US105.7c and US106.16c.

Nomura chief economist Stephen Roberts said the Australian dollar was trading within a tight range today.

"There's really not been much movement, given where things have been over the last couple of days," Mr Roberts said.

"It was up over the weekend because of the weakness of the US dollar but we really haven't had a lot of new information today."

At around midday (AEST), China released a host of economic data, including their official consumer price index (CPI), which rose 5.5 per cent in May - the highest inflation rate in nearly three years.

The dollar added half a US cent shortly after the data was released.

Mr Roberts said the data was fairly close to expectations.

He said US manufacturing data due out tomorrow may prove more important to the short-term direction of the Australian currency.

Tomorrow, Reserve Bank Governor Glenn Stevens is due to address the Economic Society of Australia in Brisbane.

Mr Roberts said investors would be closely monitoring Mr Stevens' comments.

"If he maintains the line that over time, interest rates need to rise ... that may provide the Australian dollar a little support."

He said the local unit may continue to trade within its narrow range for the remainder of the domestic session yesterday, with no more Australian data due.

Meanwhile, the bond market was firmer at noon.

At noon, the June 10-year bond futures contract was trading at 94.830 (implying a yield of 5.170 per cent), up from 94.825 (5.175 per cent) on Friday.

The June three-year bond futures contract was at 95.225 (4.775 per cent), up from 95.200 (4.800 per cent).