The Australian dollar is staying above 88 US cents after the market breathed a sigh of relief when a report on European bank stability was released.
At 1200 AEDT on Monday, the local unit was trading at 88.19 US cents, up from 87.65 cents on Friday.
Less than one in five euro zone banks failed a financial stress test aimed at preventing a repeat of the global financial crisis, the European Central Bank said on the weekend.
Westpac senior currency strategist Sean Callow said the report encouraged traders to move into riskier assets like the Australian dollar and stocks.
“Risk appetite improved to start the week, with the euro a little firmer after Sunday’s euro zone bank stress test results were in line with media reports; no cause for alarm,” he said.
“The official release found 24 banks across the euro area in need of 24 billion euro in capital under the 2016 adverse scenario.”
Later in the week, the US Federal Reserve will hold its policy meeting, which likely will include discussion of the timing of a Fed interest rate hike some time in 2015.
FXCM market analyst David de Ferranti said the Federal Open Market Committee meeting might be the major mover for the Australian dollar this week.
“The catalyst for the next break lower for the Australian dollar is likely to emerge from the US dollar side of the equation given the heavy US event risk,” he said.
The share market is continuing to rally as investor appetite for high yielding stocks such as the big four banks remains strong.
The market last week achieved its biggest weekly gain since February as easing concerns about economies in Europe and encouraging corporate news in the US boosted the big banks.
CMC Markets chief market analyst Ric Spooner said that trend was continuing on Monday.
“It’s onwards and upwards,” Mr Spooner said.
“The market is being fuelled by the good profit season in the US and bargain hunting for local yield stocks, particularly the big banks.”
Investors are expecting ANZ and Westpac to report earnings growth within the next week.
Commonwealth Bank was up 80 cents at $79.57, Westpac had gained 33 cents to $34.54, NAB had added 28 cents to $34.55 and ANZ was 19 cents higher at $33.21.
The big miners were mixed, with BHP Billiton down 14 cents at $33.88, Rio Tinto down 22 cents at $59.83 and Fortescue Metals was 6.5 cents weaker at $3.405.
Qantas was another strong performer, adding 5.5 cents to $1.48.
Vaccine maker CSL’s shares were up 65 cents at $76.30 after it announced it would buy Novartis’ global influenza vaccine business.
