The Australian dollar is higher, as weakness in the US dollar develops and confidence about prospects in Spain begins to grow.

China's economy grew 7.4 per cent in the third quarter from a year earlier, the National Bureau of Statistics said, but the dollar barely reacted.

The currency was trading at levels higher than those recorded before the Reserve Bank’s interest rate cut on October 2.

The dollar was trading at $US1.0383, up from $US1.0380 around midday.

Advertisement Any monetary policy that is targeted towards lowering the currency is problematic is the current environment, said ANZ currency strategist Andrew Salter.

‘‘Over the last few days we’ve received some better economic data, particularly in the United States, housing starts were very impressive as were recent claims data.

"The failure of Moody’s the downgrade Spain to junk status was also viewed as a welcome event,’’ Mr Salter said.

But the rise of the Australian dollar against the greenback did not necessarily point strength in the local currency but rather weakness in the US dollar.‘‘

The US dollar is fundamentally a weak currency,’’ said Mr Salter. ‘‘It has got a current account deficit that is large by historical standards and it has to fund that with, currently, a very low return on capital.’’

Mr Salter said real yields in the United States are very low, so the incentive for foreign investors to fund that current account position is not very strong. He also pointed to the US Federal Reserve’s announcement of the third round of quantitative easing as another move that was weakening the US dollar.

The last three-four months, the Australian dollar has been depreciating against most of the major currencies, including the US dollar, the yen, the euro and the pound.

‘‘What we’re seeing at the moment is a stabilisation in global economic data and associated stabilisation in commodity prices. If that continues it suggests the Aussie dollar might actually start to stabilise as well,’’ said Mr Salter.

Against the US dollar, ANZ is forecasting $US1.05 by the end of the first quarter next year.

In what Mr Salter described as a perverse move, overnight the Australian dollar rallied against the euro, now trading at 79.16 euro cents.