THE Australian dollar closed weaker today as investors bought into the safe-haven US currency after speculation the US Federal Reserve might raise interest rates.
At 5pm (AEST), the Australian dollar was trading at $US0.0.7929/32, down from Friday's close of $US0.8048/52.
During the local session, the unit moved between $US0.7880 and $US0.7910.
"The unit had a mixed day really, tracking the fortunes of the Asian equity markets which have exhibited some weakness today," CMC markets foreign exchange dealer Tim Waterer said.
"It's not so much a story of Australian dollar weakness, but of a rejuvenated US dollar."
Mr Waterer said the US dollar had strengthened following better than expected employment numbers out of the US on Friday night (AEST), which helped spark speculation of an official interest rate hike.
U.S. unemployment rose to 9.4 per cent in May from 8.9 per cent in April and 8.5 percent in March, the U.S. Department of Labor reported Friday.
The US dollar also strengthened following comments by Federal Reserve Bank of Atlanta President Dennis Lockhart, a member of the US Federal Open Market Committee (FOMC), that the central bank should not keep official interest rates too low for longer than needed.
The US overnight lending rate between banks is in a target range of zero to 0.25 per cent.
"It was the case not long back when any signs of positive data coming out of the US was strong for everything but the US dollar," Mr Waterer said.
"But that tide does seem to be turning because we've seen funds go back into the US dollar on speculation the FOMC are going to have to start increasing rates now.
"Investors are beginning to price in a rate increase by the fed in the third or fourth quarter."
Mr Waterer said a lack of economic data during Tuesday's offshore session would keep the local unit trading in a tight range around between $US0.7890/10 mark.
Meanwhile weaker commodity prices and resource stocks pulled the Australian share market down almost 1 per cent, offsetting gains among financial stocks.
At 4.15pm (AEST), the benchmark S&P/ASX200 was down 36.3 points, or 0.91 per cent, at 3934.9, while the broader All Ordinaries eased 35.4 points, or 0.89 per cent, to 3933.6.
On the Sydney Futures Exchange, the June share price index contract was 14 points lower at 3944 on a volume of 29,202 contracts.
Overnight falls in commodity prices combined with a big sell down in BHP Billiton and Rio Tinto weighed heavily on the market, Ord Minnett private client adviser Jon Hancock said.
