The Australian dollar climbed to fresh 10-week highs

The Australian dollar climbed to fresh 10-week highs in Asia Monday as equity markets pepped up on details of a forthcoming U.S. plan to quarantine toxic bank debt.   Government bond prices retreated in line with a weaker close by Treasurys Friday and in response to the gains by regional share markets, including the Australian share market. The S&P/ASX 200 rose by 2.4% over the day.   U.S. Treasury Secretary Timothy Geithner told the Wall Street Journal he planned a three-pronged program that envisages the creation of a series of public-private investments to soak up US$500 billion, and maybe as much as US$1 trillion, in troubled loans and securities at the heart of the financial crisis.   Isolating the so-called toxic debt is considered crucial to unfreeze credit markets and revive growth in the world's biggest economy.   U.S. equity futures lifted on the WSJ report, fueling fresh demand for the Australian dollar, which climbed by close to one U.S. cent through the Asia session of trading.   At 0500 GMT, the Australian dollar was quoted at US$0.6967, up from US$0.6878 late Friday and just below its session high of US$0.6979. Against the Japanese yen, it was at Y66.985, up from Y65.08.   Jonathan Cavenagh, FX strategist at Westpac, said there was an "air of optimism" surrounding the toxic debt plan in the U.S., and markets were cautiously embracing it ahead of more detail from Geithner later today.   However, Amy Auster, FX strategist at ANZ, was more cautious.   "We've got to be a little bit careful about this...We've been disappointed before by Treasury," she said.   "There is a bit of risk for the Aussie if we see buy-the-rumor and then selling of the fact," Auster said.   Investors are also awaiting three speeches by senior Reserve Bank of Australia officials this week, including Governor Glenn Stevens on Wednesday.   Plenty of conjecture surrounds the April 7 policy meeting of the RBA, with financial markets continuing to price in a further interest rate cut of as much as 50 basis points.   Adam Donaldson, the head of research at the Commonwealth Bank of Australia, said the RBA could cut rates in April but it's likely to be a much smaller cut than the 100 basis point moves seen over recent months.   The RBA has cut its official cash rate target by 400 basis points since September 2008, taking it down to a 45-year-low of 3.25%.   Auster said the RBA speeches are mostly not on economic policy, so there is a real chance they will come and go with little fanfare.