Dollar higher amid Fed stimulus talk

THE dollar is up after hitting a one-week high as investors became concerned the US would not wind down its stimulus program any time soon.

THE Australian dollar is higher after hitting a one-week high overnight as investors became concerned the US would not wind down its economic stimulus program any time soon.

Early this morning, the currency peaked at 96.58 US cents as the greenback lost ground against most major currencies, including the Australian dollar.

In recent weeks, speculation the US Federal Reserve's will soon wind back its third round of bond purchases, known as quantitative easing or QE3, has caused the Australian dollar to fall against the greenback.

Talk that it won't has helped the Australian dollar rally.

At 12pm AEST today, the local unit was trading at 96.09 US cents, up from 94.77 cents yesterday.

Easy Forex currency dealer Milica Nikolic said the Australian dollar has lost some ground since the overnight rally as traders take profits.

"It's a light day for economic data, so it could be a case of people squaring up their positions ahead of the weekend," she said.

"The Aussie dollar has been quite sensitive to the talk about tapering of QE3 in the US, so it is quite responsive to the moves."

Tonight (Australian time), the US will release consumer confidence figures for June and the producer price index - the price of goods at the farm or factory gate.

"This is the big data we're waiting for because of the lack of data in the Asian and early European sessions," Mr Nikolic said.

Meanwhile, Australian bond futures prices were flat to lower at noon.

At 12pm AEST today, the June 10-year bond futures contract was trading at 96.605 (implying a yield of 3.395 per cent), level with the end of yesterday's local session.

The June three-year bond futures contract was at 97.410 (2.590 per cent), down from 97.425 (2.575 per cent).

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