Australian dollar higher after European banks stress test

The Australian dollar is back above 88 US cents after solid gains on Wall Street and some positive news about the stability of European banks.

At 7am on Monday, the local unit was trading at 88.09 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.

National Australia Bank senior economist David de Garis said the relatively good news gave market sentiment a boost.

"The ECB bank stress tests have been greeted with some relief by the market at the open of foreign exchange trade this morning," he said.

"The euro's enjoying a modest bounce in the wake of yesterday's announced European bank stress test results.

"Sterling has also jumped at the open of trade while the AUD is opening this morning just above 88 US cents."

Of interest to markets on Monday will be Reserve Bank of Australia head of financial stability Luci Ellis' address to a University of Sydney conference on the global financial crisis and the housing market.

Later in the week, the US Federal Reserve will hold its policy meeting, which will is likely to include discussion of the timing of a Fed interest rate hike some time in 2015.

AAP