Dollar higher as 'tranquility' returns

THE Australian dollar pushed higher today as investor confidence bounced back and "tranquility" returned to the market.

THE Australian dollar pushed higher today as investor confidence bounced back and "tranquility" returned to the market.

At 1200 AEST today, the Australian dollar was trading at 104.26 US cents, up from 102.80 US cents on Friday.

Since 0700 AEST today, the local unit traded between 103.57 US cents and 104.34 cents.

CMC Markets foreign exchange dealer Tim Waterer said the Australian dollar was tracking higher, buoyed by positive leads from equity markets.

"Spurred on by the 1.5 per cent rise on the local bourse, the Australian dollar quickly advanced back past the 1.04 level in morning trade," Mr Waterer said.

"The brisk start from the Australian dollar was also experienced by the Euro, which moved through 1.43 in what was quite a positive start to the week from risk assets."

He said the start of trading today had a sense of "tranquillity to it, in direct contrast to the cataclysmic nature of trading last week".

By noon, the Australian stock market was 80 points, or 1.8 per cent, higher with gains across the board.

European markets rallied on Friday after France, Belgium, Spain and Italy banned the speculative practice of short-selling stocks to combat "false rumours" that have destabilised them.

The US market also ended higher on Friday as trade calmed at the end of one of the most turbulent weeks on record.

Sentiment was further boosted after Italy approved a 45 billion euro ($A61.46 billion) austerity program, including local government cuts and a "solidarity tax" on high income earners in a bid to get out of a debt crisis.

Mr Waterer said traders were now waiting for the minutes of the Reserve Bank of Australia's (RBA) August board meeting, due tomorrow .

"Locally, Tuesday's RBA minutes will be scrutinised as the market looks to calculate how many rate hikes to price in before year end," he said.

The Australian dollar was likely to trade between 103.75 US cents and 104.65 US cents for the remainder of the domestic session, he said.

Meanwhile, the Australian bond market came under pressure as risk sentiment bounced back, causing local traders to sell safe-haven bonds in favour of relatively riskier investments.

At 1200 AEST on Monday, the September 10-year bond futures contract was trading at 95.515 (implying a yield of 4.485 per cent), down from 95.570 (4.430 per cent) on Friday.

The September three-year bond futures contract was at 96.14 (3.860 per cent), from 96.220 (3.780 per cent).