Dollar lower on euro strength

THE Australian dollar is lower, mainly on a generally strong euro performance.

THE Australian dollar is lower, mainly on a generally strong euro performance.

At 12pm AEDT today, the local currency was trading at 105.13 US cents, down from 105.34 cents yesterday afternoon.

National Australia Bank co-head of foreign exchange strategy Ray Attrill said positive indicators in Europe had boosted the region's currency, driving the Australian dollar down. At noon, the Australian dollar was trading at 79.48 euro cents, its lowest point since mid-October.

"There's been a fairly broad-based rally in the euro last night, and that's working to keep currencies like the Aussie and the Kiwi relatively contained," he said. "I think there are various things supporting Europe: Standard & Poor upgraded Greece by six notches; Spain sold more treasury bills in its regular auction yesterday than they were targeting, and at lower rates."

"Then, overall, the market's more risk-positive, because of rising confidence that we might get a deal on the fiscal cliff."

US leaders have less than two weeks to agree on measures to avoid the fiscal cliff - a series of tax rises and spending cuts due to automatically come into effect early next year. Republican house speaker John Boehner today announced a 'Plan B' budget plan that would see tax rises for people earning more than $US1 million.

Mr Attrill said international conditions would continue to influence the Aussie dollar - with a Bank of Japan meeting tomorrow, and a well-watched business survey due from Germany overnight.

"The Bank of Japan meeting could exacerbate the weaker yen theme that we've seen," he said. "The German Ifo survey is important too. If we got any signs of improvement there, given the German economy is the locomotive of European growth, that would support an extension of euro strength."

Meanwhile, Australian bond futures prices were lower at noon. At 12pm AEDT today, the March 10-year bond futures contract was at 96.610 (implying a yield of 3.390 per cent), down from 96.640 (3.360 per cent) at yesterday's close. The March three-year bond futures contract was trading at 97.200 (2.800 per cent), down from 97.220 (2.780 per cent).