THE Australian dollar closed lower as fears over the fiscal crisis in Europe and a poor day on domestic equity markets kept investors away from the local currency.
At 1700 AEST on Wednesday, the Australian dollar was trading at $US0.8331/33, down from Tuesday's close of $US0.8384/87.
Since 0700 AEST, the local unit traded between $US0.8377 and $US0.8276.
"The Aussie ended where it started the day," Royal Bank of Scotland FX strategist Greg Gibbs said.
"There's still a lot of risks associated with Europe and that's preventing it from recovering."
The dollar followed the local share market lower, he said.
At its 1615 AEST close, the benchmark S&P/ASX200 index was down 0.73 per cent to 4,381 points, while the broader All Ordinaries index ended 0.74 per cent lower at 4,403.7 points.
Official figures released during the trading day showed the Australian economy grew 0.5 per cent in the March quarter.
In the year to March, the economy grew 2.7 per cent, the Australian Bureau of Statistics data showed.
Both the quarterly and annual figures were broadly in line with market forecasts but failed to give the unit a significant boost, Mr Gibbs said.
"It helped the Aussie briefly during the trading day, but in the end the local equity market dragged it lower," he said.
Mr Gibbs predicted investors would keep their attention on Europe during the offshore session.
Meanwhile, the Australian share market was dragged lower by an investor flight to safety that favoured consumer staples and defensive stocks, leaving miners and banks weaker.
The benchmark S&P/ASX200 index was down 32.1 points, or 0.73 per cent, at 4,381, while the broader All Ordinaries index also lost 33 points, or 0.74 per cent, at 4,403.7.
On the Sydney Futures Exchange, the June share price index futures contract was 23 points lower at 4,387, on volume of 46,060 contracts.
Australian Stock Report head of research Geoff Saffer said consumer staples and defensive sectors such as telecommunications and healthcare had benefited from the flight to safety that had been triggered by renewed global economic concerns.
Insurers and wealth managers lost ground, with Insurance Australia Group plunging 22 cents, or 6.09 per cent, to $3.39 after it cut its full year insurance margin guidance.
QBE Insurance fell 56 cents, or 2.92 per cent, to $18.63, AXA Asia Pacific Holdings lost four cent to $5.80 and AMP eased five cent to $5.57.
Telstra surged nine cents to $3.04, Woolworths gained 42 cents, or 1.57 per cent, to $27.13, and Primary Health Care added 11 cents, or 2.99 per cent, to $3.79.
Consumer discretionary and energy stocks were the biggest movers, with department store owner David Jones taking a hit on Wednesday, he said.
"They are under pressure from global demand fizz, and then the US oil spill is worrying investors over related liability for parties and a potential regulatory clampdown," he said.
"Over the last six weeks a lot of the hot money has come out (of the market), especially from the mining sector."
"You've got the double whammy of the generic global market fears and flight to safety into things like gold, US dollar and the Japanese yen and out of the risk trade."
David Jones fell eight cents at $4.33, rival Myer Holdings was off four cents at $3.13 and Pacific Brands plunged six cents, or 5.97 per cent, to 94.5 cents.
A pull-back in oil prices saw Santos lose 38 cents, or 3.01 per cent, to $12.26, while Woodside Petroleum fell 16 cents to $43.43 and Oil Search dropped 10 cents to $5.51.
BHP Billiton backtracked 36 cents to $37.83 and Rio Tinto eased 12 cents to $66.76.
Banks lost ground, with Westpac falling 34 cents to $22.41, Commonwealth Bank falling 66 cents to $50.33, ANZ Banking Group down 21 cents to $22.09 and National Australia Bank off 16 cents to $24.18.
Major gold stocks traded lower, with Lihir Gold down four cents at $3.95 and Newcrest Mining losing 38 cents to $32.02.
The spot price of gold in Sydney closed at $US1225.76 per fine ounce, up $US7.215 on Tuesday's close of $US1,218.55.
Major media stocks suffered heavy falls, with Fairfax Media losing 6.5 cents, or 4.32 per cent, to $1.44, News Corporation dropping 61 cents, or 3.32 per cent, to $17.77 and its non-voting scrip down 54 cents, or 3.41 per cent, to $15.30.
Virgin Blue Holdings fell two cents, or 6.56 per cent, to 28.5 cents and Qantas Airways gave up three cents or 1.19 per cent to $2.50.
Macquarie DDR Trust was the top traded stock by turnover with 96 million units traded for $96,056.
