Dollar rises on retail trade data

THE Australian dollar is higher following the release of better than expected retail sales figures.

THE Australian dollar is higher following the release of better than expected retail sales figures.

At 12pm AEDT today, the currency was trading at 102.14 US cents, up from 101.25 US cents yesterday afternoon.

The Australian dollar dropped to an eight-month low of 101.16 US cents yesterday before recovering overnight amid gains on US stock markets.

OzForex chief currency strategist Jim Vrondas said the Australian dollar received a further boost from better-than-expected retail trade figures at 11.30am AEDT.

Figures released by the Australian Bureau of statistics today show retail spending rose 0.9 per cent in January, after three months of decline in the sector.

"Those numbers came in better than expected and that gave the Aussie dollar a bit of a boost," he said.

Mr Vrondas said the key driver for the currency this afternoon would be the Reserve Bank of Australia's monthly interest rate decision at 2.30pm AEDT.

The RBA is expected to keep the cash rate on hold at three per cent, but Mr Vrondas said traders would be looking closely at the accompanying statement for signs of the RBA's future intentions.

"We're of the view that they might not be as dovish as the market expects, so we could see the Aussie dollar squeeze higher and maybe push back to 102.50 US cents," he said.

Meanwhile, Australian bond futures were weaker at noon. At 12pm AEDT today, the March 10-year bond futures contract was trading at 96.715 (implying a yield of 3.285 per cent), down from 96.750 (3.250 per cent) yesterday. The March three-year bond futures contract was at 97.250 (2.650 per cent), down from 97.310 (2.690 per cent).