PaperlinX Ltd (ASX: PPX) says it expects a net loss for the six months to December 2010 as the strength of the Australian dollar causes a non-cash impact related to currency hedging options.

PaperlinX bought the option in December 2009 at $18 million to hedge an intercompany loan which allowed the release of $56 million in cash to fund the closure of the company's loss-making Tasmanian operations.

The Mt Waverly based firm said on Thursday the valuation loss related to the currency option as of December 2010 would be about $17 million after tax.

Despite this, the paper seller said underlying earnings, which will exclude the valuation loss of the option, are expected to be positive and meaningfully ahead of underlying earnings for the prior corresponding period.

At 1251 AEDT, shares in Paperlinx had lost 2.02 per cent to 48.5 cents, against a 0.17 per cent decline in the benchmark index.