The Australian dollar ended local trade just below 77 US cents on Monday after earlier rallying to a three-week high of 77.16 US cents. The Aussie gained as investors bet it would continue to offer a substantial yield advantage for most of 2005, a view supported by a report showing producer prices were stronger than expected in the fourth quarter. The 1.1 percent rise topped forecasts centred on a 0.6 percent increase and suggested an upside risk to Tuesday's inflation report if the increases were passed on to consumers.
"Domestic price pressures are a concern and so will be more than enough to see the Reserve Bank maintain a tightening bias," said Katie Dean, economist at ANZ Banking Group.
The Aussie traded at $0.7693/98, compared with $0.7578/83 late on Friday.
Even after no monetary policy tweaking in 2004, Australia's rates of 5.25 percent still stand 300 basis points above those offered in the US and 325 basis points higher than the euro zone.