THE Australian dollar closed more than one US cent higher on Wednesday as a rally in equity markets and stronger gold price boosted the local currency.
At 1700 AEDT, the Australian dollar was trading at $US0.9269/71, up 1.5 per cent from Tuesday's close of $US0.9131/35.
During the domestic session, the local unit traded between $US0.9239 and $US0.9282.
A senior currency trader with financial research firm Forecast, Lee Wai Tuck, said the local currency continued to appreciate on the back of a rising gold price and firmer equity markets.
The benchmark S&P/ASX200 index closed up 0.92 per cent, and the spot price of gold in Sydney was $US1,214.82 per fine ounce by 1709 AEDT. This was up $US35.40 or three per cent on Tuesday's local closing price of $US1,179.42.
Gold is Australia's third most valuable export.
"Gold prices are near a high," Mr Lee said from Singapore.
"The gold price for now is supporting the Aussie (dollar)."
Growth assets such as equities and commodity-driven currencies such as the Australian dollar rose as concerns about
Dubai World debt defaults faded, Mr Lee said.
On Tuesday, Dubai World said it was arranging to restructure around $US26 billion ($A28.04 billion) of its $US59 billion debt.
"Even though there is still a bit of focus on Dubai, markets have more or less stabilised for now," he said.
Mr Lee said financial markets were unsure if the Reserve Bank of Australia (RBA) would lift the cash rate at its next board meeting in February but its interest rate differential with other nations lent support to the local currency.
The RBA lifted the cash rate by 25 basis points to 3.75 per cent on Tuesday following moves of a similar amount in October and November.
By contrast, the US Federal Funds rate is in a target range of zero to 0.25 per cent, while Japan's key funding rate is at 0.1 per cent.
"There are questions about a RBA movement on February 2," Mr Lee said.
"But overall, a 3.75 per cent cash rate gives the Aussie support on the yield front."
Economic data due in the US during Wednesday's offshore session includes the ADP Employment report for November and the release of the Federal Reserve's Beige Book on current economic conditions.
Mr Leee forecast the Australian dollar to trade between $US0.9200 and $US0.9310 during Wednesday's offshore session.
Meanwhile, Australian shares closed at a five-week high, up one per cent on the day, after record gold prices prompted a rally by miners of the precious metal.
The benchmark S&P/ASX200 index closed up 43.4 points, or 0.92 per cent, at 4,762.4, the highest close since October 26, while the broader All Ordinaries index gained 43.6 points, or 0.92 per cent, to 4,776.7.
On the Sydney Futures Exchange, the December share price index futures contract closed 38 points higher at 4,765 points.
"The gold price is strong and the gold theme is continuing," Wilson HTM client adviser Joseph Pagliaro said.
"I think it started with fears of inflation but now its become a momentum trade."
The spot price of gold in Sydney closed at $US1,215.03 per fine ounce, up $US35.61 from Tuesday's close of $US1,179.42. During the day, it reached a record high $US1,215.30.
Lihir Gold gained 15 cents, or 4.19 per cent, to $3.73 and Newcrest added $1.86, or 4.97 per cent, to $39.26.
Sino Gold jumped 47 cents, or 5.94 per cent, to $8.38 after the company's shareholders voted in favour of the miner being bought by Canada's Eldorado Gold.
Other miners also gained on higher metals prices.
Aquarius Platinum added 33 cents, or 5.06 per cent, to $6.85, OZ Minerals increased six cents to $1.255 and Iluka rose 14 cents to $3.66.
Global miner BHP Billiton strengthened 58 cents to $41.92 and Rio Tinto gained $2.14 to $73.54.
BlueScope Steel was up eight cents at $2.90 after saying it would boost capacity at its plant in Indonesia.
OneSteel added six cents to $3.12 and Sims Metal increased 81 cents to $21.80.
The major banks added their weight to the market gain, led by Commonwealth Bank, which increased 85 cents to $54.70.
Mr Pagliaro said risk appetite was coming back.
"It'll be interesting to see whether it pushes it through 5,000 before Christmas," he said of the All Ordinaries index.
However, a weaker real estate sector bucked the general upward trend.
Westfield slipped 22 cents, to $12.05, GPT fell 1.5 cents to 58.5 cents and Mirvac lost 4.5 cents to $1.485.
"I would highlight the fact that they've had a good run and they tend to get sold if there are any sort of credit fears out there," Mr Pagliaro said about Mirvac.
In company news, Macarthur Coal gained 19 cents to $9.34 as it said coal sales had recovered following the global financial crisis.
Telstra added five cents to $3.49 after announcing the sale of its 51 per cent stake in Chinese real estate website business SouFun Holdings, when the business floats on the Hong Kong stock exchange.
Seven Network slipped six cents to $6.40 after the broadcaster lost an appeal of a case against a raft of media, telco and sporting parties related to the 2002 demise of the broadcaster's pay-television sports channel, C7.
Pharmaxis jumped 27 cents, or 11 per cent, to $2.76 after the drugs developer said that a second six-month dosing trial of Bronchitol in people with cystic fibrosis had achieved significant results.
Caltex Australia dropped 13 cents to $9.47 after the competition watchdog knocked back the refiner's attempted purchase of 302 Mobil service stations because it would probably lead to higher retail fuel prices.
Market turnover was 2.75 billion shares worth $5.49 billion.
Some 662 stocks rose, 467 fell and 331 were steady.
