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SYDNEY - The Australian dollar has closed higher after further US dollar weakness helped push the local currency towards US$0.6500.
At 1700 AEDT, the Australian dollar was trading at US$0.6487/89, up a little over one US cent, or 1.6 per cent, from Friday's close of US$0.6384/88.
It was the local currency's strongest finish since February 16, when it ended the day at US$0.6492/95.
During the day, the unit moved between a low of US$0.6417, reached less than an hour after the local session opened, and high of US$0.6509.
The Australian dollar advanced during Friday's New York trading session, as investors took advantage of a recent appreciation of the US dollar to exit long positions on the American currency.
The unit opened at 0700 AEDT at US$0.6436/45 and endured an up-and-down morning, before surging to its intraday high just after 1300 AEDT as investors continued to turn away from the US dollar.
Societe Generale chief foreign exchange dealer Paul Milton said the sharp rise this afternoon was a continuation of weak US dollar sentiment.
"The euro has popped up, the Aussie has popped up and US dollar-yen has peeled off," Mr Milton said.
"It's just a weaker US dollar story."
Mr Milton said the catalyst for this current bout of US dollar weakness was a report which raised the possibility of the US government taking over giant US banks Citigroup and Bank of America.
"All of a sudden the carry story is no longer really in vogue and the attention is returning back to the US outlook," Mr Milton said.
"This is why the market's moved so violently mid-morning."
The reports have since been denied by the Obama administration.
Mr Milton said the Australian dollar was facing resistance between US$0.6510, but was positive about the currency's prospects over coming days as investor sentiment on the US dollar continued to worsen.
"I can see the Aussie at 66 US cents in the next day or two," Mr Milton said.
"I do think there is still good downside potential in the US dollar."
Direction during Monday night's (AEDT) offshore session was expected to come from any developments regarding the possible nationalisation of Citigroup and Bank of America.
"I think the market will seek some clarity on it," Mr Milton said.
CURRENCY TABLE
CURRENCY SPOT PREVIOUS CLOSE
AUD/USD 0.6487-89 0.6384-88
AUD/JPY 60.28-35 60.07-14
AUD/EUR 0.5026-35 0.5067-75
AUD/NZD 1.2653-77 1.2672-92
AUD/GBP 0.4465-72 0.4484-91
EUR/USD 1.2895-98 1.2593-96
USD/JPY 92.95-97 94.10-13
EUR/JPY 119.87-90 118.52-56
(*Closes taken at 1700 AEDT previous local session)
At 1630 AEDT, the Reserve Bank of Australia's trade weighted index was at 54.4, up from Friday's close of 54.0.
- AAP
