Dollar rallies on good US, Chinese data

THE dollar is trading half a US cent higher this morning, after better than expected Chinese and US data encouraged investors into riskier investments.

THE dollar is trading half a US cent higher this morning, after better than expected Chinese and US data encouraged investors into riskier investments.

At 7am AEST, the dollar was trading at 106.86 US cents, up from 106.35 cents yesterday.

Since 5pm AEST yesterday, the currency has traded between 105.69 US cents and 107.16 US cents.

The local currency reached 110.11 US cents on May 3, a record high since the currency was floated in December 1983.

Bank of New Zealand currency strategist Mike Burrowes said the dollar rallied after China released economic data yesterday, including a 5.5 per cent year-on-year increase in China's consumer price index and a 13.3 per cent rise in industrial production.

"I think the market focused on the industrial production numbers, which were better than expected," Mr Burrowes said. "That saw the Aussie jump higher."

Overnight, official data showed that US wholesale price inflation had slowed in May as a sharp drop in food costs helped to offset rising energy prices.

The Labor Department said its producer price index (PPI) rose 0.2 per cent after a 0.8 per cent gain in April, after analysts' consensus estimate of 0.1 per cent.

Mr Burrowes said the data gave another boost to risk sentiment and helped push the Australian dollar as the best performing major currency during the offshore session.

At midday today, Reserve Bank Governor Glenn Stevens addresses the Economic Society of Australia in Brisbane.

Mr Burrowes said investors would be monitoring Mr Stevens's comments closely.

"Obviously, (the RBA board) signalled at their last meeting that they're pretty comfortable with the level of rates currently.

"Markets will be looking for any signs that perhaps that the RBA is going to start hiking rates sooner than expected."

He expected the dollar to trade with a slight upward bias in the next 24 hours, between 106.30 US cents and 107.40 US cents.