THE Australian dollar opened higher today as US corporate earnings and better-than-expected stress test results on European banks lifted investor sentiment on financial markets.

At 7am AEST today, the dollar was trading at US89.55c, up 0.32 per cent from Friday's close of U89.28c.

Since 5pm AEST on Friday, the domestic dollar traded between US88.97c and US89.71c, its highest level since May 14.

Wall Street extended gains on Friday as investors assessed results of stress tests on European bank and quarterly earnings of American companies.

Investor optimism about the US economic outlook rose after conglomerate General Electric said it would increase its quarterly dividend by 20 per cent.

The blue-chip Dow Jones industrial average closed up 0.99 per cent, while the broader-based Standard & Poor's 500 index ended 0.82 per cent higher.

Bank of New Zealand currency strategist, Mike Jones, said investor appetite for high-yielding assets continued to improve, bolstered by the dividend announcement from General Electric.

"We saw equity markets improve and that tended to drag the Aussie dollar a little bit higher," Mr Jones said from Wellington.

"That has continued what has generally been a better than expected US earnings season, and that has provided a boost to US equities."

Financial markets reacted cautiously to a much-awaited report after stress tests on 91 banks in 20 European nations.

Seven banks were assessed as potentially not surviving another financial crisis, according to the Committee of European Banking Supervisors.

"In the event, there weren't any nasty surprises in the stress tests and it looked to be at face value a little bit better-than-expected," Mr Jones said.

Economic data due locally on Monday include the producer price index (PPI) for the June quarter.

Financial markets forecast the PPI to have increased by 1.5 per cent in the June quarter, following a 1.0 per cent rise the previous quarter, when the Australian Bureau of Statistics releases the data at 1130 AEST.

Mr Jones forecast the Australian dollar to trade between US89.30c and US90.00c during today's Asian session.

"For the week ahead, the direction for the Aussie will rest with the CPI release on Wednesday and what that will mean for future RBA interest rate action," Mr Jones said.