Dollar higher as stocks rebound

THE Australian dollar has recovered after hitting a 10-week low overnight, but traders warn it could be heading back towards parity with the US dollar.

THE Australian dollar has recovered after hitting a 10-week low overnight, but traders warn it could be heading back towards parity with the US dollar.

At 1200 AEDT today, the Australian dollar was trading at 103.91 US cents, up from 103.63 US cents on Thursday afternoon.

Easy Forex senior dealer Francisco Solar said the Australian dollar slumped to 103.05 US cents overnight amid a string of negative news but recovered somewhat on Friday morning.

He said a weaker economic growth forecast from Portugal and large-scale protests in Spain had set the tone for markets overnight.

Despite the later recovery, Mr Solar said, the Australian dollar was on a downward trend.

"Unfortunately, with the Aussie dollar at the moment, every rebound is becoming shallower and shallower,'' he said.

"That's the definition of a downward trend, lower lows and lower highs.''

Mr Solar said the release of Chinese manufacturing data over the weekend could see the Australian dollar slump further next week, particularly if the data is worse than expected.

"With that risk event over the weekend in China, come Monday morning there could be fireworks.

"The key level is 103.03 US cents. Any break below there and you start making the possible argument for parity.''

Meanwhile, Australian bond future prices were higher at noon.

At 1200 AEDT on Friday, the June 10-year bond futures contract was trading at 95.960 (implying a yield of 4.040 per cent) up from 95.945 (4.055 per cent), on Thursday.

The June three-year bond futures contract was at 96.530 (3.470 per cent), up from 96.500 (3.500 per cent).