Dollar higher on positive sentiment

THE Australian dollar was more than half a US cent higher at noon amid strong risk-on sentiment and buoyant equity markets.

THE Australian dollar was more than half a US cent higher at noon amid strong risk-on sentiment and buoyant equity markets.

At 1200 AEST today, the Australian dollar was trading at 106.69 US cents, up from 106.10 US cents yesterday.

Since 0700 AEST today, the local unit traded between 106.54 US cents and 106.86 cents.

IG Markets dealer Chris Weston said the Australian dollar was performing strongly in the current risk-on environment and against a weakening greenback.

"Overnight, it was the standout performer of any of the G10 currencies, so it is definitely the place to be," Mr Weston said.

A flurry of good news from around the world overnight further bouyed sentiment, prompting Asian equity markets to rally.

Figures showed US consumer spending rebounded 0.8 per cent in July, after a 0.1 per cent dip in June, bouying sentiment about the world's largest economy.

At 1230 AEST, the Australian stock market was 0.7 per cent higher.

"The Australian dollar is still the proxy of global risk and with the risk-on environment, the Australian dollar did very well," Mr Weston said.

The Australian dollar dipped briefly at 1130 AEST on worse-than-expected home building approvals figures for July.

Home building approvals rose one per cent to 12,227 units in July, seasonally adjusted, below economist forecasts of a two per cent rise in approvals in the month.

"From that low of 106.55 US cents, it has rallied straight back and more, which is showing traders are happy to buy the dips," Mr Weston said.

Meanwhile, the Australian bond market was weaker.

At 1230 AEST, the September 10-year bond futures contract was trading at 95.565 (implying a yield of 4.435 per cent), down from 95.580 (implying a yield of 4.420 per cent) on Monday.

The September three-year bond futures contract was at 96.110 (3.890 per cent), down from 96.130 (3.870 per cent).