Aust dollar closes higher

THE Australian dollar has closed higher, climbing back above 104 US cents as the turmoil in Cyprus prompted fresh buying of the local currency.

Westpac chief currency strategist Robert Rennie says the Australian dollar represented something of a relative safe-haven for investors looking to park their money amid difficult times in Europe.

At 1700 AEDT on Friday, the local unit was trading at 104.26 US cents, up from Thursday's local close of 103.73 US cents.

The Australian dollar broke through 104 US cents during the overnight offshore session, as the European Central Bank set a deadline of Tuesday for Cyprus to agree to a rescue plan.

The currency also gained ground against the euro - at 1700 AEDT it was at 80.90 euro cents, up from 80.13 euro cents previously.

Mr Rennie said the Australian dollar became an attractive investment option for market players during the second half of 2012, given the global jitters and the relative strength of the domestic economy.

That sentiment faded at the start of 2013, with investors more willing to invest in other markets as things looked to be improving.

However, the unfolding events in Cyprus, as well as in Italy where politicians were yet to form government and ongoing troubles in Greece, had resulted in a return to Australian dollar safe-haven buying.

"Now we are back to really worrying about the outlook for Europe again and that makes the Australian dollar that relative safe haven again that it was in the third quarter of last year," Mr Rennie said.

"The underperformance of the euro and outperformance of the Aussie, I think part of the story here is risk aversion."

Some positive Chinese manufacturing data also gave the Australian dollar a boost of Friday.

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