Dollar firms on optimisim over debt deals

THE dollar is slightly higher this morning, as hopes strengthen that Europe and the US are edging closer to resolving debt problems. At 7am (AEST), the dollar was trading at US106.07c, up from from US106c yesterday. Since 5pm yesterday, the local unit traded between a low US105.56c and US106.28c. GFT Forex director of currency research Kathy Lien said the dollar had strengthened in the later half of the overnight session on signs Europe and the US would find a way to resolve their debt problems. "Progress is being made on both the European and US sides, so as a result we are seeing a little bit of a recovery," Ms Lien said. Overnight, Greek finance minister Evangelos Venizelos said a European debt deal was "attainable" at the upcoming European Union summit on Thursday, boosting sentiment. Start of sidebar. Skip to end of sidebar. End of sidebar. Return to start of sidebar. In the US, there was growing support for a plan that would give Obama broad powers to raise the debt ceiling. The plan would call for as much as $US1.5 trillion ($1.41 trillion) in spending cuts over 10 years and set up a special commission of lawmakers empowered to propose more cuts that would get streamlined congressional consideration. "We do still have a bit of risk aversion in general in the market because of the debt showdown on both sides of the Atlantic," Ms Lien said. "With that in mind, however, we are seeing a little bit of optimism." Ms Lien said the release today of the Reserve Bank of Australia's minutes of its July 5 board meeting and interest rate decision would be significant for the dollar. "If the RBA sounds doveish at all, they are going to reinforce fears raised last week that there could be a cut in interest rates before the end of the year and that could drive the Australian dollar lower," she said.