$A firms as spot gold hits two-month high

AAP

The Australian dollar has firmed as the gold price reached its highest point in two months.

At 1700 AEST on Monday, the local unit was worth 92.04 US cents, up from Friday's 91.57 cents.

The currency held above 92 US cents for most of the local session as the spot price of gold reached $US1,380 per fine ounce for the first time since June 7, before closing at $US1,373.30.

"That had a positive impact upon the commodity-block currencies such as the Aussie," CMC Markets foreign exchange dealer Tim Waterer said.

"That was essentially the reason why the Australian dollar was able to move through the 92 US-cent level during our session today."

Minutes from the Reserve Bank of Australia's August meeting, where the cash rate was cut to a record-low of 2.5 per cent, could help the local unit on Tuesday if it signals a change from an easing to a neutral bias.

"There's potentially still scope for one more rate cut but having said that, there is a growing expectation that the current interest rate setting could be the bottom of the easing cycle," Mr Waterer said.

The Australian dollar could jump by a quarter to half a US cent if the central bank suggests there was no urgency to cut rates again, he added.

"It depends on how aggressive that tone is."

At 1700 AEST, the Australian dollar was at 89.93 Japanese yen, up from Friday's close of 89.41 yen, and at 69.07 euro cents, up from 68.69 euro cents.

Meanwhile, Australian bond futures contract prices finished weaker as investors overlooked a drop in the University of Michigan US consumer confidence reading for August.

Commonwealth Bank interest rate strategist Philip Brown said a sharper sell-off in 10-year Australian bonds showed investors believed the US Federal Reserve would begin tapering its quantitative easing from September.

At 1630 AEST, the September 10-year bond futures contract was trading at 95.970 (implying a yield of 4.030 per cent), down from 96.020 (3.980 per cent) on Friday.

The September three-year bond futures contract was at 97.170 (2.830 per cent), down from 97.200 (2.800 per cent).