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AAP

2012-12-20

The Australian dollar has finished the local session below 105 US cents for the first time in more than a week as the currency loses some of its safe-haven lustre.

At 1700 AEDT on Thursday, the Australian dollar was trading at 104.91 US cents, down from Wednesday's local close of 105.16 US cents.

It was the currency's lowest local close since December 11, 2012, when it finished at 104.82 US cents.

During the day, the local unit moved between 104.64 US cents and 104.96 US cents.

The Australian dollar fell below 105 US cents during the US trading session and was stuck below that mark throughout Thursday's trade.

St George Bank economist Janu Chan said the Australian dollar had behaved more like a safe-haven currency in recent times, as investors sought out the AAA-rated Australian economy to park their funds amid the turmoil in Europe and US economic jitters.

Therefore, slightly better news out of Europe, and cautious optimism that US legislators would find agreement over a looming US budget deadline, had caused some of those funds to go elsewhere, Ms Chan said.

That, it turn was putting pressure on the Australian dollar.

"Because of those global worries, investors have seen the Australian dollar as relatively more attractive," Ms Chan said.

"With those worries diminishing, we are seeing that reverse a little."

At 1700 AEDT, the Australian dollar was at 88.06 Japanese yen, down from 88.66 yen. It was at 79.41 euro cents, from 79.37 previously.

Meanwhile, the bond market was firmer.

At 1630 AEDT, the March 10-year bond futures contract finished at 96.660 (implying a yield of 3.34 per cent), up from Wednesday's close of 96.630 (3.360 per cent).

The March three-year bond futures contract was at 97.250 (2.750 per cent), up from 97.220 (2.780 per cent).

"We came in this morning with a small rally from the US overnight, and we've kept that all day," Commonwealth Bank interest rate strategist Phillip Brown said.

Currency and bond markets were little changed after Federal Treasurer Wayne Swan said the government was unlikely to deliver a surplus in 2012/13.

Jordan Chong