THE Australian dollar closed higher on Tuesday as risk appetite improved and traders continued to speculate about further interest rate rises in Australia and funding assistance for Greece.
At 5pm AEDT, the Australian dollar was trading at $US0.8686/91, up 0.25 per cent from Monday's close of $US0.8664/66.
From 7am AEDT, the local unit traded between $US0.8615 and $US0.8704.
Commonwealth Bank economist Sara Hoenig said the local currency briefly pushed above the US$0.8700 mark just before the close of trade.
"That's been driven as risk sentiment improved and reports EU president Trichet has left Sydney and is heading to a summit of European Union leaders," Ms Hoenig said.
The news prompted investors to speculate that the EU might step in to help Greece as uncertainty continued around the nation's sovereign debt.
The Australian sharemarket closed weaker after Macquarie Group disappointed investors and as concerns about Europe's sovereign debt flowed through to local bank stocks.
The benchmark S&P/ASX200 index was down 16.3 points, or 0.36 per cent, at 4,505.1 points, while the broader All Ordinaries index shed 18.1 points, or 0.4 per cent, to 4,520.7 points.
Ms Hoenig predicted further gains for the local unit in the upcoming offshore session, with very little data due out during the offshore session.
"We might continue to see further risk-taking overnight particularly as offshore markets look to the EU commentary," she said.
Equities futures were pointing to a positive session in the equity market which would also support the local currency, she said.
Meanwhile, the Australian share market closed weaker after Macquarie Group disappointed investors and as concerns about Europe's sovereign debt flowed through to local bank stocks.
The benchmark S&P/ASX200 index was down 16.3 points, or 0.36 per cent, at 4,505.1 points, while the broader All Ordinaries index shed 18.1 points, or 0.4 per cent, to 4,520.7 points.
On the Sydney Futures Exchange at 1615 AEDT, the March share price index contract was four points lower at 4,469 points, on volume of 26,962 contracts.
CommSec market analyst Juliette Saly says concerns about Europe's financial health weighed heavily on Wall Street overnight and flowed on to the Australian market, sending major banks lower.
Westpac was down 37 cents at $22.88, Commonwealth Bank eased five cents to $52.72, ANZ was 40 cents lower at $20.57 and National Australia Bank lost 35 cents to $25.12.
Ms Saly said a "fairly indecisive" trading update from investment bank Macquarie Group saw its shares fall $3.07, or 6.1 per cent, to $47.28.
Macquarie Group expects second half profit to be broadly in line with the first half, taking the fiscal 2010 result to about $960 million compared to $871 million in fiscal 2009.
Its full year outlook was slightly below analysts expectations.
Ms Saly said major miners picked up steam towards the end of trade.
BHP Billiton added 25 cents to $39.85, ahead of reporting its half year results on Wednesday.
Rio Tinto, which reports its full year results on Thursday, gave up 19 cents to $66.99.
