The Australian dollar closed firmer today despite giving up some ground during the local session, after touching a two-week high in offshore trade.

At 5pm eastern daylight time, the Australian dollar was trading at $US0.8907/10, up from yesterday's close of $US0.8880/82.

During the day, the local unit traded between $US0.8903 and $US0.8953.

The Australian dollar touched $US0.8993 during the New York session, the currency's highest level since December 17 when it reached $US0.9008.

While Wall St finished flat, US data showed consumer confidence in the world's largest economy improved for the second straight month, while a separate report showed house prices rose for the fifth month in a row.

The Australian dollar opened at $US0.8943/46 at 7am AEDT, but drifted lower throughout today's Asian session after reports emerged that the US government was in discussions with lender GMAC about an additional aid package.

"I think that's been a little bit negative for the Australian dollar," Commonwealth Bank of Australia chief currency strategist Richard Grace said.

"It suggests two things - a little bit of negativity for global growth and secondly a little bit of risk aversion back towards the US dollar."

The US government was expected to provide GMAC, which is the financing arm of car maker General Motors, a capital injection of several billion US dollars.

This would help make up a shortfall in its capital base identified in recent "stress tests" conducted on the US banking system earlier this year.

US economic data due during Wednesday night's (AEDT) offshore session included the Institute of Supply Management's purchasing manager's index for Chicago for December.

Also scheduled is an auction of $US32 billion worth of seven-year US Treasury notes, which will be the last of the $US118 billion worth of US Treasury note auctions for the week.

Mr Grace said the reaction to GMAC developments as European markets opened would help determine direction for the Australian dollar during offshore trading.

"If it can stay above $US0.8900 I think that is a good result, but I expect that it may go down a little bit," Mr Grace said.

Meanwhile the Australian share market closed slightly lower today as investors took profits on another quiet day during the holiday period.

The benchmark S&P/ASX200 index fell 11.8 points, or 0.24 per cent, to 4,833.3 points, while the broader All Ordinaries index dipped 9.7 points, or 0.2 per cent, to 4,847.0 points.

On the Sydney Futures Exchange, the March share price index futures contract was 29 points lower at 4,828 on a volume of 13,761 contracts.

CMC Markets sales trader manager Grant Tierney said the local market experienced another quiet day today, following a weak lead from United States markets.

"We saw some profit-taking today, and I think people are just about ready to see 2009 off," Mr Tierney said.

Among the major banks, Commonwealth Bank of Australia shed eight cents to $54.42, Westpac sagged 13 cents to $25.27, National Australia Bank firmed two cents to $27.20 and ANZ added four cents to $22.74.

In the resources sector, global miner BHP Billiton eased 22 cents to $42.70 and Rio Tinto improved 22 cents to $74.64.

Zinc and copper producer Kagara nudged up one cent to $1.04 after it bought a metals deposit from Liontown Resources for $4.5 million.

Oil and gas producer Woodside Petroleum surrendered 30 cents to $47.35 and Santos retreated eight cents to $14.00.

In the gold sector, Newmont slipped four cents to $5.33, Newcrest descended 32 cents to $34.96, and Lihir was off two cents at $3.25.

The price of gold in Sydney was $US1095.33 per fine ounce, down $US9.545 on Tuesday's close of $1104.875.

Telco Telstra was steady at $3.41, and Optus-owner Singapore Telecommunications was down two cents at $2.45.

Retailer Woolworths was eight cents lighter at $27.59, and Wesfarmers, which owns Coles, was 12 cents heavier at $31.14.

In the media sector, News Corp lost five cents to $17.95, and its non-voting stock lifted 10 cents to $15.50.

Consolidated Media fell two cents to $3.07, and Fairfax weakened one cent to $1.71.

Among other stocks, Domino's Pizza Enterprises Ltd rose 15 cents to $5.25 after it said it had acquired Belgian pizza chain Pizza Company.

Shares in aged care and retirement villages operator IOR Group were listed on the Australian Securities Exchange (ASX) today and traded at $1.20 per share.

The top-traded stock by volume was oil and gas explorer Monitor Energy, with 84.57 million shares worth $424,300 changing hands.

Monitor Energy was 0.2 cents lower at 0.4 cents.

National turnover was 1.06 billion shares worth 1.74 billion, with 521 stocks up, 454 down and 347 unchanged.

On Wall St overnight, the Dow Jones Industrial Average index was down 1.67 points, or 0.02 per cent, at 10,545.41 as data showed rising consumer sentiment and home prices falling at a slower pace.

Earlier at noon AEDT, the Australian dollar was trading at $US0.8926/31, up 0.54 per cent from yesterday's close of $US0.8880/82.

During the morning, the local unit traded between $US0.8926 and $US0.8951.

A senior currency strategist with financial markets research group Forecast, Lee Wai Tuck, said the Australian currency lost some of yesterday's gains during today's trade.

In the offshore session, the Australian dollar hit a high of $US0.8993 and started the local session at $US0.8943/46 at 7am AEDT.

"The Aussie dollar has come off its highs from yesterday,'' Mr Lee said from Singapore.

Mr Lee said reports yesterday of a 20 per cent increase in a new deal for Australian coal had given the local currency a boost.

Coal is Australia's most valuable export.

"There was some interest in the Aussie after the announcement of Xstrata and Tokyo Electric setting a price for Australian thermal coal, at $US85 a tonne,'' Mr Lee said.

"That gave a bit of positive tone for the Aussie late yesterday.''

The proposed deal is about a 20-per-cent rise from the $US70-72 a tonne from a year earlier.

Also, the currency received support during the offshore trade as corporations fixed demand, where firms had large orders for currencies, Mr Lee said.

The thin trade at this time of year exaggerated moves on currency markets, he said.