Dollar softer after peak on Wednesday

THE Australian dollar was trading lower this morning, as investors await a key vote in the US House of Representatives on a Republican proposal to raise the country's debt-ceiling.

THE Australian dollar was trading lower this morning, as investors await a key vote in the US House of Representatives on a Republican proposal to raise the country's debt-ceiling.

At 7:00 (AEST), the Australian dollar was trading at 110.05 US cents, down from 110.40 US cents on Thursday afternoon.

Since 17:00 (AEST) on Thursday, the local unit traded between 109.78 US cents and 110.76 US cents, according to Iress data.

It hit a peak of 110.81 US cents on Wednesday night, its highest level since the fixed exchange rate era ended with its float in December 1983.

The House of Representatives is to vote later today on a two-step plan forged by Speaker John Boehner to raise the nation's $US14.3 trillion ($13.02 trillion) debt limit, even though a majority of senators have vowed to block it and the White House has said it will veto the bill.

With only five days to go before an August 2 deadline when the US Treasury says it will no longer be able to borrow funds to pay its bills, stock markets remained nervous that a fragile economic recovery after the 2008 global financial crisis could be at risk.

GFT Forex director of currency research Kathy Lien said there was very little chance that a bill would be passed by the House and Senate before the weekend.

"If the House rejects Boehner's bill, it could lead to a slight sell-off in the US dollar, and if they approve the bill, it should lift the dollar," Ms Lien said.

"The greenback's reaction to the House vote in general should be minimal because, even if it is approved by the Senate, it will be amended by Senate Majority Leader Reid who will then go back to the House for another vote early next week."