Dollar up on local data

THE dollar is half a US cent lower after the outcome of a US Federal Reserve Policy meeting disappointed markets.

THE dollar is lower, but is on the way up, after the release of good local economic data and rising expectations of a turning point in solving the eurozone debt crisis.

At 12pm AEST today, the local unit was trading at 104.65 US cents, down from 105.04 cents yesterday.

Easy Forex currency dealer Tony Darvall said the dollar fell overnight but got a boost this morning from the encouraging local economic data.

"We did dip down to 104.30 US cents but the local economic data was a little bit better than expected, so we're going to be retesting the 105 US-cent level," Mr Darvall said.

Retail spending figures rose for a second consecutive month, up 1.0 per cent in June, which beat market forecasts of a rise of 0.6 per cent.

The Australian Bureau of Statistics also released international trade figures for June, with the balance on goods and services showing a surplus of $9.0 million in the month.

Economists' forecasts had centred on a deficit of $400 million in June.

Mr Darvall said he doesn't expect the dollar to make any big moves before the end of the European Central Bank (ECB) meeting tonight (Australian time).

Expectations for the meeting increased last week when ECB president Mario Draghi said he would do "whatever it takes" to protect the euro from the region's debt crisis.

One way to do this would be for the ECB buying government bonds from financially stricken euro zone members.

Mr Darvall said the dollar could push above 106.50 US cents if the ECB actions match the rhetoric.

"There's a sizeable chance it's going to be a big announcement and if it is there will be a rally," he said.

"Expectations are great that something will come out tonight, so we're probably set up for a little bit of disappointment."

Meanwhile, the Australian bond market was weaker.

At 12pm AEST today, the September 10-year bond futures contract was trading at 96.935 (implying a yield of 3.065 per cent), down from 96.970 (3.030 per cent) yesterday.

The September three-year bond futures contract was at 97.380 (2.620 per cent), down from 97.440 (2.560 per cent).