THE Australian dollar closed almost one cent lower as investors shied away from the local currency on European debt fears and rumours the Australian central bank will keep rates on hold.
At 5pm (AEDT), the Australian dollar was trading at $US0.8891/95, down 1.3 per cent from Thursday's close of $US0.9009/13.
Between 0700 AEDT and 1700 AEDT today, the local unit traded between $US0.8887 and $US0.8967.
It was the lowest close for the Australian dollar since January 4.
RBC Capital Markets senior economist Su Lin Ong said the local unit came under pressure for much of the day due to the "whole global risk aversion trade''.
"The ongoing concerns about Greece, lingering concerns about China ... you can see all risk barometers are under pressure,'' she said.
"Everything from equities to barometers like the Aussie dollar.''
Fears Greece will default on its debt has raised concerns about the high level of indebtedness in other European nations such as Portugal.
Start of sidebar. Skip to end of sidebar.
End of sidebar. Return to start of sidebar.
Ms Ong said the local unit suffered during domestic morning trade amidst rumours the Reserve Bank of Australia (RBA) may not increase official interest rates when its board meets next week.
"That's weighed on the Aussie currency as well, so it's facing a number of headwinds at the moment.''
Weak sentiment on equity markets in Asia helped drag the Australian dollar lower in morning trade.
Ms Ong said RBA credit data released today had provided "modest support'' to the local currency.
Total credit provided to the private sector by financial intermediaries rose by 0.3 per cent in December, following a 0.1 per cent increase in November, the RBA said today.
"I don't think that was the main driver,'' Ms Ong said.
"The dominant theme at the moment, despite the key events this week being a shift in FOMC sentiment and stronger data generally, the dominant theme still seems to be risk aversion and as long as that remains the Aussie is going to be under pressure.''
Trade in the offshore session would be heavily dependent on the risk theme as markets remained ``quite nervous,'' she said.
"Whether it's justified or not is debatable, but if the risk aversion theme continues to dominate then the Aussie is going to struggle.''
New farmers grow knowledge at Chattanooga conferenceDollar lower at noon, bonds firmer
