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SYDNEY, Jan 2 AAP

January 02 2013, 12:38AM

The Australian dollar is higher as the US House of Representatives considers a bill that would avert a so-called fiscal cliff of automatic tax hikes and spending cuts.

At 1200 AEDT on Wednesday, the currency was trading at 104.21 US cents, up from 103.83 cents on New Year's Eve on Monday.

Shortly after midday the currency reached 104.37 US cents, its highest level since December 21.

Easy Forex currency dealer Tony Darvall said the Australian dollar spent most of Wednesday morning trading in a narrow range of between 103.90 and 104 US cents as markets waited for developments in the US.

But he said the currency rallied more than a fifth of a US cent after shortly before midday, just before news broke that the US House of Representatives would vote on a deal to avert the fiscal cliff measures due to come into effect this week.

"As soon as it pops up five pips everyone hops on for ten pips and people start to think there is something out there," he said.

"I wouldn't get too ahead of ourselves but that is probably a positive sign," he said.

The House of Representatives is preparing to vote on a bill that would that would preserve Bush-era tax cuts for most Americans, but raise taxes on households earning more than $450,000 a year.

The bill, which has already passed the Senate, would also defer, for two months, more than $US100 billion ($A96.90 billion) in automatic spending cuts due to come into effect from this week.

Mr Darvall said the Australian dollar was likely to rally to around 104.5 US cents if bill passed the House, but could fall sharply if the bill is blocked by conservative Republicans.

He said a surge in the Australian dollar against the Japanese yen, also had a positive flow-on effect for the currency against the US dollar.

At midday the Australian dollar was trading at 90.44 Japanese yen, its highest level since 2009.

Meanwhile, Australian bond futures prices were lower at noon.

At 1200 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.650 (implying a yield of 3.350 per cent), down from 96.745 (3.255 per cent) on Monday.

The March three-year bond futures contract was at 97.240 (2.760 per cent), down from 97.320 (2.680 per cent) previously.