Aussie dollar flirts at Christmas parity

THE dollar has ended the local session slightly higher, trading in a range just below parity with the US dollar.

THE dollar has ended the local session slightly higher, trading in a range just below parity with the US dollar.

At 5pm AEDT, the local unit was trading at 99.72 US cents, up from Tuesday's close of 99.63 cents.  Since 7am AEDT, the local unit has traded between 99.50 US cents and 99.89 cents.

During the local session the Australian dollar continued to hit record highs against the British pound and the Euro.

RBC Capital Markets senior currency strategist Sue Trinh said currency markets were quiet ahead of the holiday period.

"Everything is just moving in very quiet range trading mode at the moment, which is to be expected in the lead-up to Christmas," she said.

"So liquidity is thin and there seems to be very little going through really, it's just Christmas markets at the moment."

Ms Trinh said the release of New Zealand's gross domestic product figures tomorrow would be the only data risk for the Australian dollar for the rest of the week.

"Really there is not a lot more that is going to be market moving for the Aussie dollar.  The expected price action for the rest of the week is likely to be range trading, within the 99.00 US cent to parity with the US dollar," Ms Trinh said.

The dollar closed at 83.46 yen, up from 83.38 on Tuesday and at 75.90 euro cents up from 75.63 previously.  The euro finished at $US1.3138, down from Tuesday's close of $US1.3174 and at 110.02 yen, down from 110.24.

The US dollar was at 83.75 Japanese yen, up from 83.69.

The bond market ended the session slightly softer following weaker US Treasuries.  At 4.30pm AEDT on the ASX 24, the March 10-year bond futures contract was at 94.340 (implying a yield of 5.660 per cent), down from Tuesday's close of 94.370 (5.630 per cent).

The March three-year bond futures contract was at 94.650 (5.350 per cent), down from 94.680 (5.320 per cent).  UBS interest rate strategist Matthew Johnson said the bond market was slightly weaker in quiet trade ahead of Christmas.

"There was a late softening in US Treasuries but we didn't quite follow and we opened weak and they sold off a touch down to midday and it basically traded flat since," he said.

Mr Johnson said the focus for the bond market over the Christmas-New Year period would be a series of US government bond auctions by the Federal Reserve.

"I personally think rates may trade a little bit heavy over the next few days as we head up for the auctions next week, the Fed will auction about $US100 billion worth of securities in the period between Christmas and New Year."

The 90-day bank bill closed level with Tuesday at 4.980 per cent, while the 180-day bank bill closed at 5.190, up from its previous close of 5.170 per cent.

At 4pm AEDT, the RBA's trade weighted index was at 75.4, its highest end-of-day level since February 12, 1985. On Tuesday it was at 75.3.