KEY POINTS:
The Australian dollar closed weaker as poor European economic growth data outweighed the effect of surprisingly strong local capital expenditure statistics on market sentiment.
At 1700 AEDT, the Australian dollar was trading at US$0.6476/81, down from Wednesday's close of US$0.6511/14.
During the local session, the unit moved between an early low of US$0.6466 and a noon high of US$0.6566.
The Australian dollar opened weaker on Thursday as weak European economic growth data hurt the popularity of high-yielding currencies.
The local unit then climbed above US$0.6500 as surprisingly strong domestic capital expenditure data convinced financial markets the economic grew in the December quarter.
National Australia Bank head of research Peter Jolly said the Australian dollar gained a boost as the capital spending data had some traders forecasting interest rates being on hold in March.
"There is a growing chance the RBA (Reserve Bank of Australia) will do nothing next week," he said.
"The capital expenditure was a surprisingly robust report."
New private capital expenditure rose 6.0 per cent in real terms, seasonally adjusted, in the December quarter, the Australian Bureau of Statistics (ABS) said on Thursday.
The result was in sharp contrast to market expectations of a three per cent decline, and was underpinned by a 11.5 per cent jump in expenditure in the building and structures category that includes work done in the mining sector.
The robust results did not do enough to keep the Australian dollar above Wednesday's closing levels, with traders taking their lead from the bad news in Europe.
German economic output declined by 2.1 per cent in the last quarter of 2008, its sharpest contraction since the country was reunited in 1990.
It was the third consecutive quarterly contraction in the German economy, the biggest in Europe.
Another bad session on Wall Street during offshore trade was expected to keep the pressure on the Australian dollar.
But the local currency was expected to find support during offshore weekend trade ahead of the RBA's March 3 board meeting when it will decide on whether to cut interest rates further.
Debt futures markets are expecting the RBA to cut the cash rate by 25 basis points next week, which would take interest rates to three per cent for the first time since 1960.
- AAP
