Dollar lower at noon, but back from lows

THE dollar was lower at noon, partially bouncing back from its weekend lows amid easing worries over Irish sovereign debt.

THE dollar was lower at noon, partially bouncing back from its weekend lows amid easing worries over Irish sovereign debt and the Chinese economy.

At midday (AEDT), the dollar was trading at US98.78c, down from Friday's close of US99.11c.

Since 7am, the local unit traded between US98.65c and US98.97c.

Ireland's cost of borrowing hit record highs last week, fuelling fears over eurozone debt.

However, Irish Finance Minister Brian Lenihan on Friday said the government won't need to apply for aid from the European Financial Stability Fund.

There is also speculation China might hike its interest rates after its inflation rose to a two-year high of 4.4 per cent.

IG Markets analyst Cameron Peacock said the dollar's fall followed equities and commodities in the Friday night offshore session.

"Obviously we saw a pull back in the risk trade," he said.

"There was concern that China might have been looking to hike their rates again and we saw that playing out in the session on Friday across Asia and in the US.

"With metal prices coming off, we saw the Aussie dollar coming off.

"At the moment there is a bit of confusion and a wait and see game as to what Ireland does. At the end of the day, Ireland makes about two per cent of the Eurozone GDP. It's tiny.

"It's more the significance and the implications that it might have for some of these other nations that has people concerned."

Mr Peacock said worries about the Chinese economy may also ease.

"All these concerns about China slowing down is a load of rubbish," he said.

"They growing at 10 per cent. Sure, they've got a bit of an inflation problem, they may tighten rates a little bit, but it's not going to materially slow their economy or their demand for our commodities."

"The general consensus is that the US dollar is going to stay fairly weak, commodity prices are going to be fairly strong and equities markets are going to move forward," he said.

Mr Peacock said US data would be of interest to the market this week.

Retail sales figures and the Empire State manufacturing survey will be released tonight (AEDT), and industrial production data will be out tomorrow night.

"They're all going to be watched to see the strength of the underlying recovery (in the US economy)," he said.

Meanwhile, bonds were weaker at noon.

At midday today on the ASX 24, the December 10-year bond futures contract was at 94.595 (implying a yield of 5.405 per cent), down from 94.635 (5.365 per cent) on Friday.

The December three-year bond futures contract was at 94.860 (5.140 per cent), down from 94.900 (5.100 per cent).