THE dollar was lower at noon as speculation of a near term US interest rate rise and sparked buying of the American currency.
At 12:00 (AEDT), the dollar was trading at $US0.9088/91, down from Friday's close of $US0.9164/71.
During the domestic session, the local unit traded in a tight range between $US0.9083 and $US0.9118.
4Cast Financial Markets currency strategist Michael Katz said the US dollar, which moves inversely to the local unit, strengthened after a strong performance on US stock markets on Friday night (AEDT) amid speculation a US interest rate rise in nearing.
"(The Aussie) is grinding lower," he said.
"There's been some talk throughout the market today that the US dollar could be losing that corrolation with strong data, strong equity markets making for a weak US dollar.
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"Basically, the market perception of a (US Federal Reserve interest rate tightening) has been brought forward and what we're seeing now is strong data having an effect on rates and pushing yields higher."
The US Dow Jones industrial average rose 0.63 per cent on Friday night (AEDT) to close at 10,471.50 points, while the Standard & Poor's 500 index gained 0.37 per cent, to 1106.41 points.
The board of governors of the US Federal Reserve is expected to meet on Wednesday night (AEDT) to make its final scheduled interest rate decision of 2009.
Most market commentators firmly expect the US target interest rate of zero to 0.25 per cent to remain.
However, Mr Katz said there is speculation the Federal Open Market Committee (FOMC), the Fed's policy making arm, will inject more aggressive language into its accompanying statement.
"What that's doing is its boosting the US dollar in a 'risk on' environment," Mr Katz said.
"Previously, the Aussie dollar was finding strength when equities were up and risk sentiment was strong.
"But what we're finding now is the first and foremost thing risk is doing at the moment is having an effect on US yields."
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