Dollar down on US strength

THE Australian dollar declined after wary investors moved into safer currencies as leaders in Europe and the US battled to find a way to resolve debt problems.

THE Australian dollar declined after wary investors moved into safer currencies as leaders in Europe and the US battled to find a way to resolve debt problems.

At 1200 AEST today, the Australian dollar was trading at 106.00 US cents, down from 106.73 cents at Friday's local close.

Since 0700 AEST on Monday, the local unit traded between 105.84 US cents and 106.53 US cents.

Commonwealth Bank currency strategist Joseph Capurso said the Australian dollar fell against a rising US dollar, as investors sought out a safehaven against the volatile situations unfolding in Europe and the US.

"What we're seeing is about risk aversion,'' Mr Capurso said.

"The euro is falling a bit so the safe haven currencies, like the yen and US dollar, are strengthening.''

Investors tend to buy the US dollar and yen when they feel nervous about the global economy.

Eurozone nations will hold an extraordinary summit on July 21 in Brussels on ways to tackle the debt crisis and provide fresh aid for bailed-out Greece.

Additionally, the EU regulator revealed on Friday that eight European banks failed stress tests, with five of the eight failures Spanish and two Greek.

In the US, President Barack Obama has pressed lawmakers to reach a deal quickly to avoid an early August debt default he described as economic "Armageddon'', amid fevered congressional wrangling.

Mr Capurso said he expected the Australian dollar to fall further this week and tipped it could slump to 104.50.
In local economic data, the Reserve Bank of Australia (RBA) will release the minutes for the July board meeting on Tuesday.

But Mr Capurso said the market was likely to ignore the minutes and continue to focus on the debt issues in Europe and the US, given the time that has elapsed since the RBA's board meeting.

Meanwhile, short term bond futures benefitted from the surge to safer investments.

At 1200 AEST, the September three-year bond futures contract was at 95.670 (implying a yield of 4.33 per cent), up from 95.620 (4.380 per cent) on Friday.

The September 10-year bond futures contract was at 95.085 (4.915 per cent), up from 95.080 (4.920 per cent).
AAP nls/dlm