Aussie dollar closes high

SYDNEY - The Australian dollar closed higher on Thursday after positive local data and a strong day on regional equity markets lifted risk appetite and pushed the currency back above US$0.8200.

At 1700 AEST, the local currency was trading at US$0.8225/28, up from Wednesday's close of US$0.8188/91.

During the day, the Australian dollar moved between US$0.8144 and US$0.8226, the latter reached just before the local close.

The unit found support after Australian Bureau of Statistics (ABS) figures showed the number of home building approvals rose 9.3 per cent in June, the largest monthly increase in four years.

The result also beat market expectations of an eight per cent increase and almost offset an unexpected 11 per cent decline in May.

St George Bank chief economist Besa Deda said the building approvals data helped spur the Australian dollar higher as financial markets brought forward expectations of interest rate rises from the central bank.

"What we are really seeing now is financial markets pricing in rate hikes quite early for next year, almost fully pricing a four per cent cash rate by the end of June," Ms Deda said.

"That does make interest rate differentials supporting for the Aussie dollar."

The Reserve Bank of Australia (RBA) has kept the cash rate at a 49-year low of three per cent for the past three months.

By contrast, official interest rates at 0.1 per cent in Japan, 0.5 per cent in the UK and 1.0 per cent in the eurozone.

The US federal funds rate sits in a target range between zero and 0.25 per cent.

Ms Deda said the rally on local and Asian equity markets also played role in the Australian dollar's performance.

"You've seen the Chinese equity market come back and of course they were what drove down US equities overnight and lifted risk aversion," Ms Deda said.

"When equities are moving higher, that reflects a greater appetite for risk and that generally would lift demand for the Aussie dollar, assuming all other factors are equal."

The Shanghai Composite index posted a 1.69 per cent rally on Thursday, bouncing back from a five per cent decline the previous session.

CURRENCY TABLE

CURRENCY SPOT PREVIOUS CLOSE

AUD/USD 0.8225-28 0.8188-91
AUD/JPY 78.15-18 77.06-10
AUD/EUR 0.5834-42 0.5782-89
AUD/NZD 1.2586-92 1.2483-90
AUD/GBP 0.4990-97 0.4994-01
EUR/USD 1.4088-90 1.4155-57
USD/JPY 95.01-03 94.11-14
EUR/JPY 133.85-88 133.22-26

(*Closes taken at 1700 AEST previous local session)

At 1600 AEST, the Reserve Bank of Australia's trade weighted index (TWI) was at 65.2, down from Wednesday's close of 65.3.

- AAP