Dollar lower after strong start

THE dollar closed lower on today as risk appetite fled from buyers after reports the Bank of America may have failed the US government's "stress test." At 5pm (AEST), the dollar was trading at 73.88 US cents, down from yesterday's close of 73.97 cents.

During the local session, the unit moved between a high of 74.25 US cents and a low of 73.33 cents.

The Australian dollar opened trade at 74.24 US cents, the strongest start to the local session since October 6 last year.

The local currency was well supported in early offshore trade, with investors reacting positively to the Reserve Bank of Australia's (RBA) decision yesterday to hold the cash rate at 3 per cent.

During today's session, better than expected retail trade data provided some support for the local unit, Forecast economist Michael Turner said.

Australian retail trade at current prices rose 2.2 per cent in March to a seasonally adjusted $19.296 billion, from $18.873 billion in February, figures from the Australian Bureau of Statistics (ABS) found.

Economists had forecast a seasonally adjusted rise of 0.5 per cent in March.

Within half an hour of the ABS data being released, the local unit's momentum was sapped by media reports speculating the Bank of America Corp (BoA) required about $US34 billion ($45.87 billion) in new capital, Mr Turner said.

BoA is one of the banks subject to the US Federal Reserve's "stress tests" on 19 of the United State's biggest banks.

The results are due to be released tomorrow evening (AEST).

"The Bank of America story came out, from that moment the Aussie took a bit of a hit," Mr Turner said.

"Risk aversion kicked in a lot, particularly against the yen today.

"Within half an hour of the BoA story, it traded down to 73.30 US cents. It got punished from that moment on."

At 5pm, the dollar was trading at 72.50 Japanese yen, down from yesterday's close of 73.13 yen and at 55.57 euro cents, up from 55.43 euro cents.