THE Australian dollar has opened firmer as rises in base metal prices boosted the commodities driven currency ahead of the festive season.
At 0700 AEDT, the Australian dollar was trading at $US0.6841/49, up from Monday's close of $US0.6816/22.During the overnight session, the local unit traded between $US0.6815 and $US0.6893.
Corporate dealer with online currency trading firm OZForex Darren Richardson said a rise in commodities prices lifted the Australian dollar in subdued trade.
Copper futures for three month delivery rose $US50, or 1.7 per cent, to $US2,980 a tonne on the London Metals Exchange.
Gold, Australia's third most valuable export, was up $US9.10 to $846.50 per fine ounce in New York trading.
"The Australian dollar was supported by higher commodities prices," he said from Toronto.
"A higher gold price is always a bonus for the Australian dollar."
Mr Richardson said trading was thin as Christmas approached.
"It is a pretty quiet day across the board, with the holiday season coming upon us," he said.
"The currency has oscillated 20 points below and above $US0.6850 on a pretty regular basis."
Mr Richardson said investors were increasing their use of the carry trades, which was beneficial to the local currency.
In carry trades, investors obtain funds in an economy with low borrowing costs and buy where returns (interest rates) are higher.
Australia's target lending rate of 4.25 per cent compares with 0.1 per cent in Japan and a range of zero to 0.25 per cent in the US.
"People are also taking advantage of the Aussie dollar against the yen and the US dollar," Mr Richardson said.
"That has provided a bit of support for the Aussie dollar."
With no local data due on Tuesday, Mr Richardson said the Australian dollar should stay between $US0.6830 to 0.6870 in the domestic session.