THE Australian dollar closed lower after rebounding off nine-month overnight lows to claw back almost two US cents following a recovery on equity markets.
At 1700 AEST, the Australian dollar was trading at $US0.8272/75, down 0.5 per cent from yesterday's close of $US0.8314/16.
Since 0700 AEST yesterday, the local unit traded in a wide range between $US0.8073 and $US0.8367.
Overnight, the local unit bounced off its lowest level since July 20 last year.
"I think it's been the recovery in equity markets,'' Commonwealth Bank currency strategist Richard Grace said.
"They recovered from the lows we saw earlier this morning.
"While they didn't finish in positive territory, they have recovered off their lows.
"That's provided a little bit of a return to risk aversion.''
The local unit initially lost ground on Friday on an unexpected increase in US jobless claims and ongoing concerns about the euro zone debt crisis, depressing investor confidence about global economic recovery.
Investors' sentiment to risk continued to weaken as a rise in US jobless claims added to doubts about European policy makers having unified action to solve the sovereign debt crisis in the region.
"There is still some negative sentiment there,'' Mr Grace said.
While the Australian dollar had recovered somewhat on Friday, there was still considerable uncertainty over Europe, he said.
The Australian share market rebounded at the close today, sharply reversing a three per cent drop in earlier trade amid claims that the Reserve Bank of Australia (RBA) had supported the Australian dollar.
Currency traders said it was unlikely that the RBA had stepped in to support the local currency.
The benchmark S&P/ASX200 index closed down 11.1 points, or 0.26 per cent, at 4,305.4 points, after falling to a low of 4.175.7.
The broader All Ordinaries index fell 16.6 points, or 0.38 per cent, to 4,325.8 points.
Against the euro, the Australian dollar fell 8 per cent below its most recent high of 71.76 euro cents last week.
Mr Grace forecast the local currency would recover a little during the offshore session.
"I'm not anticipating it to recover significantly,'' he said.
"If the US stock market opens up higher, I can see the Aussie moving higher.
"But it's very difficult to be confident about this in this environment.
"We may see it get back to 85 (US cents) this evening.''
He forecast the local unit would trade between US$0.8100 to US$0.8500.
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