$A higher on euro zone commentary

Mon July 30, 2012 8:01am

THE Australian dollar has hit a fresh high in response to comments from European leaders vowing to act on the region's debt.

At 1700 AEST on Monday, the local unit was trading at 104.65 US cents, up from 104.26 cents on Friday.

Commonwealth Bank currency strategist Joseph Capurso said comments from Italian prime minister Mario Monti and German Chancellor Angela Merkel over the weekend, vowing to protect the euro currency had kept the Aussie dollar high on Monday.

However, with a meeting of the European Central Bank on Thursday, the market would be looking for leaders to make good on their promises.

"If the ECB does not do something this week, it will be very disruptive," he said.

"(ECB president Mario) Draghi's comments, and the follow-up from Monti and Merkel have led the market to believe that something is coming later this week, and I do think they will deliver.

"Expectation of that has been holding up the euro and the Aussie dollar as well."

Mr Capurso said local retail trade data due on Thursday would be watched by the market, but other than that, the focus would be offshore.

"We think a lot of the payments for the government's household assistance package came out in late May and into June, so we'll see a big bump up in the June month sales," he said.

"That could push the Aussie dollar up half a US cent."

A meeting of the US Federal Open Market Committee (FOMC) would also be important for markets.

At 1700 AEST, the Australian dollar was at 82.01 Japanese yen, up from Friday's close of 81.65 yen, and at 85.22 euro cents, up from 84.82 euro cents.

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