Dollar up on EU rate rise, US jobs data

THE dollar is higher on Friday after a burst of positive jobs and spending data from the US and an interest rate rise by the European Central Bank overnight buoyed sentiment.

THE dollar is higher on Friday after a burst of positive jobs and spending data from the US and an interest rate rise by the European Central Bank overnight buoyed sentiment.

At 7am AEST today, the dollar was trading at 107.77 US cents, up from 107.51 US cents at close yesterday.

Since 5pm AEST on Wednesday, the local unit traded between 107.16 US cents and 107.82 US cents.

GFT FOREX director of currency research, Kathy Lien, said the dollar was stronger after the release of promising economic data in the US and a rise in European official interest rates.

US markets were buoyed by better than expected figures on US job creation in June, as well as a solid gain in retail sales for the month.

"The reason we're seeing such strength in the Australian dollar is that we had a healthy (US job creation) number, which basically told us that US non-farm payrolls (due on Friday) may not be as bad as some feared," Ms Lien said.

"(With) the healthy employment report we had from Australia (on Thursday), we have the perfect combination for a continued rally in the Australian dollar."

As well, the European Central Bank (ECB) raised its benchmark interest rate to 1.5 per cent overnight, its second increase this year as it tries to dampen inflation.

"At the end of the day, people realise that the ECB is the only major central bank raising interest rates and they are not stopping any time soon," Ms Lien said. "All that has made investors optimistic and we see that optimism translate into demand, not only for the Aussie dollar but US equities and commodities."

Ms Lien expected the local currency to remain "quite firm" over the domestic session today.

"I actually think it is going to break its one-month high of 107.95 US cents and probably move to above 108 US cents," she said.

In economics news today, RBA assistant governor (financial markets) Guy Debelle delivers an address in Adelaide to the Workshop on Global Macro and Finance Issues, entitled "In Defence of Current Account Deficits".

The AOFM issues $700 million of October 2014 bonds.