Dollar holds its ground after choppy night

THE Australian dollar was higher today although risk appetite was waning, after the release of contrasting economic data from the US and Europe overnight.

THE Australian dollar was higher today although risk appetite was waning, after the release of contrasting economic data from the US and Europe overnight.

At 0710 AEST today, the Australian dollar was trading at 104.72 US cents, up from 104.44 US cents yesterday.

Since 1700 AEST yesterday, the local unit traded between 104.06 US cents and 105.06 US cents.

It hit a peak of 110.81 US cents on July 27, its highest level since the fixed exchange rate era ended with its float in December 1983.

Westpac New Zealand senior market strategist Imre Speizer said the Australian dollar was firmer after being pulled around in "choppy" overnight trade.

"Overall, the Aussie has held up pretty well, although risk appetite overall is a bit weaker today," Mr Speizer said.

France and Germany failed to reassure the market with the outcome of a meeting on the eurozone debt crisis, while disappointing eurozone growth figures weighed on sentiment early in the session, he said.

Mr Speizer said the Australian dollar had peaked about 0210 AEST before falling sharply on "disappointment about the outcome" of a meeting between the eurozone leaders.

"They didn't make a plan to issue a collective eurobond to finance the troubled countries, which was the main thing markets were looking for," Mr Speizer said.

Instead, France's Nicolas Sarkozy and Germany's Angela Merkel said they would propose an EU-wide tax on financial transactions and seek to create a eurozone governing body headed by European Union council president Herman van Rompuy.

The eurozone had posted meagre 0.2 per cent second quarter growth, dragged down by a decline in German performance and a stagnant France economy.

Lifting risk sentiment during the session was better than expected industrial and housing data from the US, which boosted the risk-sensitive Australian dollar.

Also overnight, Fitch Ratings said it would maintain its rating on US debt at the highest grade, AAA, and issued a "stable" outlook, meaning it expects the rating to stay there, another positive for sentiment.

In economic data today, the Australian Bureau of Statistics is due to release the June labour price index at 1130 AEST.

The Westpac/Melbourne Institute Survey of Consumer Sentiment for August is due at 1100 AEST.

Both data sets were of secondary importance for the Australian dollar, Mr Speizer said.

The Australian dollar was expected to trade between 104.00 US cents and 105.20 US cents during the domestic session today, he said.