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AAP

2012-12-11

The Australian dollar is slightly stronger, despite a weak reading for domestic business confidence and ahead of a meeting of the US central bank.

At 1700 AEDT on Tuesday, the local unit was trading at 104.82 US cents, up from 104.78 cents at Monday's close.

Since 0700, it has traded between 104.63 US cents and 104.93 cents.

CMC Capital Markets chief market strategist Michael McCarthy said potentially negative events last week, and a weak business survey on Tuesday had failed to weaken the Aussie dollar.

"We saw a very weak string of data last week, we had an interest rate cut, we saw a strong US dollar, and none of it was enough to get the Aussie dollar down," he said.

"We've been looking for a pullback now for some time, and it just won't happen - it's a sign of underlying strength."

On Tuesday, National Australia Bank's monthly business survey showed that confidence had slumped to minus nine points in November, from minus one in October.

It is now at its lowest point since the global financial crisis in 2009.

Mr McCarthy said a meeting of the US Federal Open Market Committee on Tuesday and Wednesday would be the next big event for the market.

"Market expectations at this stage are that there'll be no change in interest rates, and secondly, that there'll be very little change in the language in their statement," he said.

At 1700 AEDT, the Australian dollar was at 86.28 Japanese yen, down from 86.35 yen on Monday, and at 80.88 euro cents, down from 81.19 euro cents.

Meanwhile, Australian bond futures prices were higher on Tuesday.

At 1630 AEDT on Tuesday, the December 10-year bond futures contract was at 96.955 (implying a yield of 3.045 per cent), up from 96.930 (3.070 per cent) on Monday.

The December three-year bond futures contract was trading at 97.395 (2.605 per cent), up from 97.370 (2.630 per cent).

ANZ head of interest rate research Tony Morriss said uncertainty around Italy's political situation had influenced Australian bond prices.

"Bonds started to rally first thing this morning," he said.

"Italian political instability has definitely got market attention - we saw a move in peripheral European bonds, and (US Fed) Treasuries rallied as well."

Italy's prime minister Mario Monti resigned over the weekend, after a withdrawal of support from the party of former leader Silvio Berlusconi.

Mr Morris said NAB's business survey had also pushed Aussie bond prices higher.

AA

Caroline Smith