Dollar lower but gaining ground

THE dollar is still lower despite gaining some ground this morning helped by some strong Chinese data.

dollar

THE Australian dollar is still lower despite gaining some ground during morning trade helped by some strong Chinese manufacturing data.

At 12pm AEST today, the local unit was trading at 94.27 US cents, down from 94.50 cents on Friday.

Since 7am AEST today, the Australian dollar has traded between 93.67 and 94.38 cents.

Late this morning, HSBC released its Chinese manufacturing data for September, which came in stronger than expected.

Easy Forex currency dealer Tony Darvall said the Australian dollar was being driven by good Chinese economic data and changing Reserve Bank of Australia interest rate cut expectations.

"If you're thinking it is going up to 96 or 97 US cent then this is the perfect opportunity," Mr Darvall said.

"It was not a surprise at all the data came in stronger today."

Mr Darvall said any gains by the Australian dollar will be limited because the higher it goes the more likely it is the RBA will cut its cash rate. The rate's already at a record low of 2.5 per cent.

Interest rate cuts and the expectation of rate cuts generally puts downward pressure on the local currency.

"So, unless we get clarification on that particular point from the RBA, then that's going to be the main story for sellers," Mr Darvall said.

Meanwhile, Australian bond futures prices were mixed.

At 12pm today, the December 10-year bond futures contract was trading at 95.960 (implying a yield of 4.040 per cent), down from 95.995 (4.005 per cent) on Friday.

The December three-year bond futures contract was at 96.970 (3.030 per cent), down from 97.010 (2.990 per cent).

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