THE dollar opened higher today as disappointing economic data in the US weakened the American currency.
At 7am AEDT, the dollar was trading at $US0.8797/02, up 0.45 per cent from yesterday's close of $US0.8759/61.
During the offshore session, the local unit traded between $US0.8735 and $US0.8818.
The US dollar weakened during offshore trade after a report showed sales of new homes in the US fell to a seven-month low in November, by 11.3 per cent to a seasonally adjusted 355,000 from a downwardly revised 400,000 in October, the US Department of Commerce said.
It was below the market forecast of 440,000 and the lowest number of new homes sold since April.
The housing data dampened speculation that the US Federal Reserve might raise its near-zero benchmark interest rate sooner than expected, a move that would strengthen the US currency.
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Recent economic data, including retail sales and unemployment, indicated an improvement in the US economy and raised expectations of rate rises from the US central bank.
Higher interest rates, and the expectation of higher rates, can support a currency as investors move funds for better returns.
Bank of New Zealand currency strategist Danica Hampton said the housing data and investors adjusting their holdings of US dollar ahead of the end of 2009 had weakened the US dollar.
"We did see the New Zealand dollar and the Aussie gain on a weaker US dollar," Ms Hampton said from Wellington.
"The sales of new homes in the US report put a dampener on people's expectations on the pace of a recovery in the US."
Firms were squaring their books as the end of the 2009 calendar year approached and trading subdued as companies were less willing to take new positions, Ms Hampton said.
"It is the end of the financial year on December 31 for many US companies, so they are balancing their positions," she said.
"With liquidity thin at this time of year, moves can be exaggerated."
Ms Hampton forecasts the Australian dollar to trade between $US0.8770 and $US0.8820 during the domestic session today.
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