THE dollar was lower at noon, but recouping some of its overnight losses as investors move back into risk assets.
At noon (AEST) today, the dollar was trading at $US0.8441/44 half a cent down from yesterday's close of $US0.8490/92.
From 7am (AEST) today, the local unit traded between $US0.8417 and $US0.8457.
Commonwealth Bank chief currency strategist Richard Grace said the dollar was well supported in morning trade against the US dollar and on the cross rates.
"I think that's reflective of a little bit of risk appetite coming back," Mr Grace said.
People are becoming less bearish about the European situation, encouraged by the recovery in global equity markets and offshore developments and a slight softening in the US dollar after quite a surge last night."
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He forecast further strength in afternoon trade.
"It's going to hit resistance as we get up to $US0.85, but I can see it continuing to trend higher," he said.
Mr Grace said the release of non-farm payrolls figures in the US overnight were expected to show strong growth.
"That environment is firm for the US dollar so it could could put a cap on the ability of the Australian dollar to rise but still the Australian dollar does well on the cross rates."
Mr Grace said the mid-term outlook for the local unit was good.
"I think the environment is still very supportive for the dollar and an eventual target of $US0.87 is more than likely.
"It might take a while to get there through."
Meanwhile, the bond market was weaker at noon.
At noon (AEST), today, the yield on the Commonwealth Government April 2020 bond was 5.427 per cent, slightly down from yesterday's close of 5.428 per cent, while the May 2013 bond was at 4.800 per cent, up from 4.784 per cent.
On the Sydney Futures Exchange, the June 10-year bond futures contract was at 94.575, steady with yesterday's close, while the June three-year bond futures contract was 95.140, down from yesterday's close of 95.150.
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