Dollar weaker on EU debt plan worries

THE Australian dollar fell on scepticism that Europe's leaders are close to resolving the region's debt crisis and as traders await local inflation data.

THE Australian dollar fell on scepticism that Europe's leaders are close to resolving the region's debt crisis and as traders await local inflation data.

The local currency reached 105.01 US cents yesterday - its highest level since September 10 - but was losing steam this morning.

Investors had been hoping that more details on a European rescue package would be announced by eurozone leaders tomorrow but that was increasingly looking unlikely, said Mike Hollows, trading director at HiFX.

"There's a lot of scepticism that anything concrete will come out tonight and that's putting some pressure on markets, although the Aussie is going particularly well," Mr Hollows said.

Earlier in the week, European Union leaders backed plans to recapitalise banks which would be hit by a massive writedown of Greek debt and also agreed to explore a re-opening of the core European Union treaty to cover closer eurozone integration.

At 7am (AEDT) today, the Australian dollar was trading at 104.27 US cents, down from 104.56 cents yesterday.

Locally today, the Australian Bureau of Statistics releases consumer price index (CPI) figures for the September quarter.

The CPI is used by the Reserve Bank of Australia (RBA) as a key measure of inflation.

"Obviously the RBA did make specific mention of the CPI when they were considering their policy (earlier in the month)," Mr Hollows said.

"We've got the RBA meeting next week so today's data will be a big one for a trading perspective."

Market watchers have been expecting inflation to stay high, which they say makes an imminent cash rate cut unlikely.

According to an AAP survey of 12 economists, headline CPI is forecast to have risen by 0.6 per cent in the September quarter and 3.5 per cent in the 12 months to September.

For underlying inflation, which excludes sharp movements in some categories, the median forecast was 0.6 per cent in the September quarter for an annual rate of 2.6 per cent.