Dollar up on weak US data, gold

THE dollar is higher after gold soared and US home sales put downward pressure on the greenback.

Australian banknotes

THE Australian dollar is higher following a surge in gold prices and weaker-than-expected US data that put downward pressure on the greenback.

At 12pm AEST today, the local unit was buying 92.72 US cents, up from 92.22 cents yesterday.

The US dollar was trading lower after weaker-than-expected figures showed existing home sales dropped by 1.2 per cent in June.

Meanwhile, gold futures posted their biggest percentage gain in more than a year and settled above $US1300 an ounce for the first time in a month.

Easy Forex currency dealer Tony Darvall said the Australian dollar was stronger thanks to the gold rally and weakness in the greenback as well as Friday night's announcement from China's central bank that it would lift controls on lending interest rates and allow financial institutions to set them.

He said gold prices surged after the US commodities market regulator warned banks of a possible investigation into their metals warehousing businesses.

The move came after the US Federal Reserve said last week that it was reviewing a policy that allows deposit-taking banks to trade physical commodities.

"Gold jumped on the back of that news so the Aussie dollar is getting a rise from that," Mr Darvall said.

"There's big moves in gold and there's a correlation between gold and the Aussie."

Meanwhile, Australian bond futures prices are mixed.

At 12pm AEST, the September 10-year bond futures contract was trading at 96.335 (implying a yield of 3.665 per cent), down from 96.345 (3.655) yesterday.

The September three-year bond futures contract was unchanged at 97.360 (2.640 per cent).

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