THE Australian dollar closed higher yesterday after hitting a 13-month high as a rise in resource prices lifted the commodities-driven currency. The dollar was at US87.96c, up from Wednesday's close of US87.91c. During the day, the unit moved between US87.81c and US88.60c. The currency began the local session at US88.32c and rose to US88.60c in morning trade, its highest level since August 11 last year. A senior dealer with online currency trader EasyForex, Francisco Solar, said the dollar was lifted initially on higher prices for commodities. Crude oil for November delivery rose $US3.90 to close at $US70.61 a barrel on the New York Mercantile Exchange. The price of gold in Sydney was $US1007.52 a fine ounce, up $US10.75 on Wednesday's closing price of $US996.77. "This morning we had a nice positive sentiment heading into Asia, with commodities higher," Mr Solar said. The currency had also benefited on raised expectations of the Reserve Bank of Australia lifting interest rates after a firm retail sales report on Wednesday. Retail turnover increased by 0.9 per cent in August, almost double the forecasts. A rise in interest rates attracts investors to deposit funds where they can find higher yields. "We also had the great retail sales report yesterday, where markets had started pricing in a rate hike some time this year," Mr Solar said. "They have nearly priced in two rate hikes, 50 basis points (in total) this year. "That is positive for the Aussie and helped to push it to its high earlier today." He said weaker equity markets hampered the rise of the dollar during afternoon trade. The benchmark S&P/ASX 200 index closed down 0.9 per cent, Japan's Nikkei 225 index ended 1.53 per cent lower and Korea's KOSPI index lost 1.7 per cent. At the close, the dollar was trading at Y79.23, up from Wednesday's close at Y78.92, and at 60.38 euro cents, up from 60.14 euro cents previously. The euro finished at $US1.4568, down from Wednesday's close of $US1.4619, and at Y131.23, down from Y131.24. The $US ended the local session at Y90.08, up from Y89.78 previously. Meanwhile, the Australian bond market closed stronger. The yield on the commonwealth government March 2019 bond was at 5.292 per cent, down from Wednesday's close of 5.349 per cent, and the yield on the April 2012 bond was at 4.791 per cent, down from 4.836 per cent previously. On the Sydney Futures Exchange, the December 10-year bond futures contract price was at 94.645, up from Wednesday's close of 94.570, while the December three-year bond futures contract was at 95.000, up from 94.960 previously. JPMorgan interest rate strategist Sally Auld said the local bond market benefited from a weak day on regional equity markets. "That's probably brought back a bit of a bid tone to our market just in the afternoon session," Ms Auld said. The 90-day bank bill rate closed at 3.370 per cent, down from Wednesday's close 3.390 per cent, while the 180-day bank bill rate closed at 3.780 per cent, where it closed previously.

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