The Australian dollar is higher after signs deficit reduction talks in the US have lifted market sentiment.

At 12pm AEDT on Monday, the currency was trading at 103.61 US cents, up from 103.21 US cents on Friday afternoon.

Commonwealth Bank currency strategist Joseph Capurso said the Australian dollar received a boost over the weekend after US Democrats and Republicans expressed willingness to find common ground and agree to a long-term deficit reduction program for the world’s largest economy.

If the parties cannot agree to measures to reduce the country’s debt levels, it will face a so-called ‘fiscal cliff’ of automatic spending cuts and tax hikes due to come into effect in early 2013.

Advertisement ‘‘So far what’s coming out of Washington is positive so that is probably supporting the Aussie,’’ he said.But Mr Capurso said that, with no major local economic news, the currency had traded in a narrow range on Monday.

‘‘It’s been a pretty quiet start to the week and I think its going to stay that way today,’’ he said.Meanwhile, Australian bond futures were lower at noon.

At 12pm, the December 10-year bond futures contract was at 97.015 (implying a yield of 2.985 per cent), down from 97.040 (2.960 per cent) on Friday.The December three-year bond futures contract was trading at 97.470 (2.530 per cent), down from 97.510 (2.490 per cent).