The Australian dollar closed half a cent higher today after reports of a European rescue plan for Greece drove investors into risk assets.
At 5pm AEDT, the Australian dollar was trading at $US0.8746/51, up 0.69 per cent from yesterday's close of $US0.8686/91.
From 7am AEDT, the local unit traded between $US0.8737 and $US0.8799.
RBC Capital markets senior economist Su-Lin Ong said the local unit opened reasonably well bid on the back of a resumption in risk appetite.
"We saw all risk indicators up last night, equities and currencies such as the Aussie so that continued early in our morning session," Ms Ong said.
Reports of a rescue plan for Greece ahead of a meeting of European Union (EU) officials on the region's debt crisis on Thursday lifted demand for high-yielding assets such as equities and commodity-driven currencies.
Global markets have declined in recent weeks on uncertainty about the health of the public finances in Greece, Ireland, Portugal and Spain and the possible impact on an economic recovery.
Fears of the Greek Government defaulting on its debts has increased the cost of insuring the bonds of other similarly indebted nations.
Wall Street rallied on the reports of a possible Greece rescue plan, with the Dow Jones Industrial Average closing up 1.52 per cent, while the the broad-based Standard & Poor's 500 index was 1.3 per cent higher.
At 4.15pm AEDT, the benchmark S&P/ASX200 index was 8.3 points higher, or 0.18 per cent, at 4,513.4 points, and the broader All Ordinaries index had firmed 12.3 points, or 0.27 per cent, to 4,533 points.
However, Ms Ong said the local currency came off a little bit after the release of domestic housing and consumer confidence data.
Total housing finance by value fell by 2.8 per cent in December, seasonally adjusted, to $21.9 billion.
The Westpac-Melbourne Institute index of consumer sentiment fell 2.6 per cent to 117.0 points in February, from 120.1 in January.
"Both confidence and housing finance numbers fell a tad more than expected so I guess it kept the market guessing about whether the Reserve Bank will or will not move."
She said the Australian dollar also followed the euro down.
Ms Ong said the market was waiting for some kind of announcement from Europe over Greece.
"There's obviously been speculation overnight that there may or may not be a (rescue) package but all of this comes ahead of this European summit, so markets remain a little nervous.
"Even though risk was back on last night ... until the market sees some hard details, it's going to remain pretty wary."
Meanwhile, the Australian share market has closed moderately higher despite strong profits from market heavyweights BHP Billiton and Commonwealth Bank (CBA), after early gains were pared back by disappointing trade numbers from China.
At 4.15pm (AEDT), the benchmark S&P/ASX200 index was 8.3 points higher, or 0.18 per cent, at 4,513.4 points, and the broader All Ordinaries index had firmed 12.3 points, or 0.27 per cent, to 4,533 points.
On the Sydney Futures Exchange, the March share price index contract was 10 points higher at 4,484, on volume of 31,072 contracts.
Macquarie Private Wealth director Martin Lakos said the Australian market's performance was disappointing given better than expected first half 2010 earnings results from BHP Billiton and CBA's confirmation of a 13 per cent jump in first half net profit.
"It does seem that the market started to tilt over after the disappointing trade numbers out of China, which I think might have been a bit of a catalyst," Mr Lakos said.
"They were weaker than the market was expecting, so that probably concerned the market that the Chinese economy is cooling."
The major indices reversed course after 11.30am (AEDT) after China reported exports increased 21 per cent in January over December and imports climbed by a record 85.5 per cent.
Shares in BHP Billiton finished up three cents to $39.88 after an intraday high of $41.24.
The world's biggest miner unveiled a 134 per cent increase in first half profit but said it remained cautious about the world economic recovery and that demand for metals products remained sporadic.
Rio Tinto closed 95 cents, or 1.42 per cent, higher at $67.94 ahead of its 2009 annual profit result tomorrow.
Major lenders also pared morning gains to finish in the red.
CBA shares opened higher after Australia's biggest bank reported a 54 per cent jump in first half cash profit on a decline in bad debt charges and strong volume growth across the business.
The stock reversed course and closed closed down 89 cents, or 1.69 per cent, to $51.83.
"The payout ratio was a bit below expectations, but the positive side is they're still being prudent," Mr Lakos said.
Westpac lost 14 cents, or 0.61 per cent, to $22.74, National Australia Bank fell 58 cents, or 2.31 per cent, to $24.54, and ANZ Banking Group was off 37 cents, or 1.8 per cent, to $20.20.
