Australian dollar pauses rally

The Australian dollar took a bit of a breather on Friday having set a series of highs particularly against the euro this week, while the kiwi dollar inched up as slightly better than expected US data added to optimism for global growth. The high-yielding Aussie, bolstered by rallying commodity prices, is also seen as a safe place to park money for the holiday period, providing investors insulation from troubled Europe.
The Australian dollar last traded at around $1.0029, after hitting six-week highs at $1.0067 overnight. For the week, the Aussie was up 1.5 percent against the dollar. Support for the currency is seen at around $0.9960, with resistance seen at the 28-year high around $1.0182 set on November 11.
"The main reason the Aussie is up here is that no one can afford to be short over the next couple of weeks because the carry kills you," said Matthew Johnson, interest rate strategist at UBS, adding he expected the Aussie to stay around parity for the next few weeks.
Trading was very limited with the market already in holiday mode. The Australian stock market ended trading early on Friday at 0300 GMT, and US markets will be shut along with many European centers. Financial markets in Australia and New Zealand will reopen on December 29.
High commodities prices have certainly helped the local currency with spot iron ore reaching a seven-month high at $170.70 earlier in the week and the CRB index, a global commodity benchmark index, also hitting a two-year peak. Positive US data released on Thursday provided an improved outlook for the world's largest economy, lending further support to industrial metals.
The euro edged up to A$1.3072, having plumbed a record low at around A$1.2997 on Thursday. So far this year, the single currency has fallen 18 percent. With no resolution in sight for the euro zone debt crisis, analysts said it's only time before the market took the euro even lower.
Portugal was the latest euro zone member to have its ratings cut, with Fitch downgrading the country's credit rating by one notch to A-plus with a negative outlook. France, however, secured a thumbs up from, which affirmed its AAA rating. Sterling also drifted off lows to A$1.5383, a day after setting a fresh 25-year low around A$1.5287.
The kiwi nudged up to $0.7479 and was hovering near one-week highs of $0.7502, helped by stronger commodities and global equities. The currency, which had been sold down in expectation of weak growth data on Thursday, has fully recovered after the report was less dire than some in the market had feared. The Aussie eased to NZ$1.3439, having set a fresh decade high of NZ$1.3505 on Thursday.