THE dollar closed at a four-month high on news that China's trade surplus had unexpectedly shrunk.
At 5pm (AEST), the local unit was trading at $US0.9231/33, up from Thursday's close of $US0.9215/17.
Since 7am (AEST), the local currency traded between $US0.9205 and $US0.9241.
CMC Markets foreign exchange dealer Tim Waterer said the local unit was initially affected by Australian share market weakness before rallying in afternoon trade on the back of strong Chinese data.
"The Australian dollar has put on some gains in a pretty short space of time in the afternoon as has the euro," Mr Waterer said.
"I think it's just a reaction to some of the Chinese data that was out earlier today, which was quite encouraging really."
China's trade surplus unexpectedly shrank to $US20.03 billion ($21.71 billion) in August from the previous month as imports accelerated, official data showed.
Falls to mining and energy stocks led the Australian share market to close about half a per cent lower.
Mr Waterer said the Chinese data helped the dollar bounce off session lows.
"There really hasn't been any domestic drivers for it today."
Mr Waterer predicted a quiet offshore session, with a thin offshore data calendar ahead.
"The gold price will be a key driver tonight."
Mr Waterer said traders were examining whether equities could sustain their current strength.
He predicted the dollar could reach as high as $US0.9350 in the near term.
"Certainly $US0.9300 - $US0.9350 is not out of the question," he said.
"While things are looking very rosy in our own backyard, the data from offshore isn't quite as convincing at this stage."
