KEY POINTS:
SYDNEY - The Australian dollar closed weaker today as yet another political delay in the US government's financial sector bailout plan turned traders off high-yielding currencies.
At 1700 AEST, the Australian dollar was trading at US$0.8318/22, down from yesterday's close of US$0.8390/93.
During the day, the local currency
traded between a late afternoon low of US$0.8295 and a morning high of US$0.8378.
The Australian dollar struggled to break through Thursday's closing levels today as Congressional Republicans rejected US President George Bush's US$700 billion (A$839.53 billion) plan to buy toxic mortgage assets.
The conservative law makers from President Bush's own party have instead proposed a financial rescue package of tax breaks and a new government-sponsored insurance program for mortgage-backed securities.
Republican House of Representatives congressman Eric Cantor said Wall Street, and not taxpayers, should pay for any rescue package.
"Instead of a purchase scenario where you have the government injecting US$700 billion right up front into the markets, what you have here is an insurance plan," the lawmaker from Virginia said.
"In order to get this insurance, the banks with these failed assets would have to pay for the government backing, pay for the insurance."
CMC Markets foreign exchange dealer Tim Waterer said the Australian dollar had traded within a tight range since Tuesday as delays in the Bush administration's proposed rescue plan made traders reluctant to back riskier, high-yielding currencies.
"Any indication of a delay in passing that bailout package means we're going to see selling of high-yielding currencies," he said.
"With the bailout package, there's quite a deal of uncertainty on whether this will be US dollar positive or negative.
"There's uncertainty on how it will affect the US deficit and the US dollar."
The Australian dollar opened 2.5 US cents firmer on Monday, to start the session at US$0.8365/70, after US Treasury Secretary Henry Paulson's weekend announcement of the US government proposal to help troubled financial institutions.
Since Tuesday, the Australian dollar has broadly traded between US$0.8300 and 0.8400 for most of the session as the Bush administration faced daily hurdles from Congressional Democrats and Republicans.
Mr Waterer said high-yieldling currencies like the Australian dollar would trade within a tight range until Congress and the White House could agree on a bill.
"There's still reluctance to take positions until we get some outcome," he said.
The Australian dollar was expected to take direction tonight from Wall Street's reaction to the latest political developments in the US.
"Stronger reaction in US equities could see a stronger performance in the Australian dollar and it could make a run for 84 (US) cents," Mr Waterer said.
At 1600 AEST, the Reserve Bank of Australia's trade weighted index (TWI) was at 65.5, down from yesterday's close of 65.9.
- AAP