THE Australian dollar closed almost half a US cent higher on Thursday, recovering partially from the one cent fall after Wednesday's lower than expected inflation figures.
At 1700 AEST on Thursday, the Australian dollar was trading at $A0.89991/93, up from Wednesday's close of $A.8947/51.
Since 0700 AEST, the domestic dollar traded between $A0.8906 and $A0.8994.
Commonwealth Bank of Australian currency strategist Joseph Capurso said the Aussie started to recover in London trade overnight.
"The Aussie is stronger across the board, it's more of a recovery from the big sharp loss at the CPI (announcement) yesterday."
The New Zealand dollar and the Australian dollar fell sharply after the Reserve Bank of New Zealand raised its official interest rate for the second time in less than two months.
The kiwi central bank also said prospects for economic recovery in that country had deteriorated.
However, the Australian dollar staged a recovery in the afternoon.
"It's well and truly made up for the losses incurred when the Reserve Bank of New Zealand raised rates and spoke very dovishly," Mr Capurso said.
"The reason it fell is because the comment that came with the rate announcement was perceived that they would not be increasing rates much more and that's what pushed down both the Kiwi and the Aussie."
Mr Capurso said economic growth figures wer due on Friday night (AEST) and if the US reacted strongly, then the Aussie would fall.
Meanwhile, The Australian share market has snapped a four-day winning streak, finishing marginally weaker despite gains among miners and the banks.
The benchmark S&P/ASX200 index closed down 5.8 points, or 0.13 per cent, at 4,524.1 points, while the broader All Ordinaries index fell 5.9 points, or 0.13 per cent, to 4,536.2 points.
On the Sydney Futures Exchange the September share price index contract was 14 points lower at 4,494 on a volume of 20,885 contracts.
Austock Securities senior client adviser Michael Heffernan said it was comforting the market had held above the psychological barrier of 4,500 points.
"After a good performance yesterday it is not a bad result at all in my view," Mr Heffernan said.
"The power of the market clearly was the relatively strong performance by some of the resources stocks.
"It is a very strong recovery from the depths of about a month ago."
Mining giant BHP Billiton closed up 26 cents at $40.46 - its strongest close in three months when it closed at $39.53 on May 3.
Rival Rio Tinto rose 46 cents to $71.50.
Gold producers were mixed, with Newcrest Mining down six cents at $32.72 and its takeover target, Lihir Gold, was steady at $4.06.
At the local close spot gold was trading at $US1,168.50 per fine ounce, up $US4.55 on Wednesday's close of $US1,163.95 per ounce.
The materials and resources sectors both finished in the black, while financials finished slightly up despite a mixed performance by the big banks.
Commonwealth Bank was up 41 cents at $53.01 and Westpac rose 10 cents to $24.25 but National Australia Bank declined one cent to $25.33 and ANZ fell four cents to $23.19.
Macquarie finished down 47 cents at $38.39.
Major energy stocks were weaker, with Woodside Petroleum down 44 cents at $41.72 and Oil Search losing nine cents to $5.88.
Santos dropped 24 cents to $13.57 while Origin Energy edged down one cent at $15.63.
News Corp fell 21 cents at $16.41 while its non-voting scrip reversed 11 cents at $14.57.
Fairfax was steady at $1.485 and Consolidated Media rose three cents at $3.13.
Retailers were mixed, with Wesfarmers continuing recent gains to rise 10 cents to $31.23, but Woolworths was down 24 cents at $45.56.
Among the department store stocks, David Jones rose seven cents at $4.80, Myer was up two cents at $3.43 and
Harvey Norman gained two cents at $3.59.
Centro Properties Group rose one cent to 21 cents after it announced it is refinancing and extending the debt of its US business.
The top-traded stock by volume was Stirling Products, with 105.36 million shares worth $1.14 million changing hands.
