Dollar closes higher on US concerns

THE dollar closed higher today after investors spooked about the state of the US Government's fiscal position sold the American currency. At 5pm (AEST) the dollar was trading at $US0.7686, up 1.11 per cent from yesterday's close of $US0.7599.

During local session, the local currency moved between $US0.7643 and $US0.7704.

Royal Bank of Scotland currency strategist Greg Gibbs said the dollar had benefited from some weakness in the US currency, prompted by a news article about the credit worthiness of the US Government.

A former comptroller general of the US, David Walker, wrote in London's Financial Times newspaper that the US's triple-A credit rating was at risk.

"There are few articles floating around with people worrying about the fiscal position of the US and where it is heading," Mr Gibb said.

"Even though we are here worrying about our Budget blowout, the market is seeing the developments in the US as more alarming, which is contributing to a weaker US dollar."

Mr Gibbs said the release of Australia's 2009/10 federal Budget last night had a minimal effect on the local currency.

The Federal Government forecast an underlying cash deficit of $57.59 billion in 2009/10, representing 4.9 per cent of gross domestic product (GDP).

"It had little impact as most of the numbers were in the market beforehand," he said.

US retail sales figures for April and import and export prices for the same month were due out during tonight's offshore session.

Business inventories data for March in the US was also scheduled for release.

Financial markets were forecasting retail sales in the US to have remained flat during April, compared to a 1.2 per cent drop in March.

"Retail sales in the US is the only one of major importance offshore," Mr Gibbs said.

"Strong numbers recently have been US dollar negative as it supports the case for global recovery and risk appetite."

Mr Gibbs forecasts the dollar to trade between $US0.7640 and $US0.7730 during today's offshore session.