THE dollar retained a healthy glow in Asian trading yesterday, ending the session virtually unchanged but just short of its post-float highs.
Traders said the currency was well supported, albeit starting to look a little overstretched on most models and Friday's US payroll data will set the course for the pair over the near-term.
Deutsche Bank currency strategist John Horner said if payrolls fell short of the expected increase of 190,000 in February, the US dollar will come under pressure, potentially helping the Australian dollar towards $US1.05.
Local February retail sales and building approvals data due tomorrow will also attract attention, but Mr Horner said it would take a lot to shake the market from its view that the Reserve Bank of Australia was happy to keep the official cash rate on hold at 4.75 per cent.
At yesterday's close, the dollar was trading at $US1.0267, up US0.05c from Monday and against the yen was Y=83.79, up from Y=83.88.5. Its post-float high is now $US1.0314.
St George chief economist Besa Deda said the dollar was well supported by a number of fundamentals: rising terms of trade, the strong underlying domestic fundamentals, attractive yields and a global economy in recovery.
She said with no major economic data due in the offshore session, the domestic currency was likely to consolidate some of its recent gains.
RBS currency strategist Greg Gibbs said the rally in the dollar, from lows on March 17 of about US97.04c could be spent and tipped a retreat to a range of $US1 to $US1.02.
"Rather than viewing the recent surge to a new high since 1982 as the beginning of a new extended upswing, we view this as a stretch towards the top end of a broad, almost flat, range," he said.
Global conditions and risk factors for the dollar had deteriorated over recent months, he said. There is a risk the trend will eventually turn down.
Another factor on the immediate radar is the change in government in NSW after 16 years.
The new Coalition government claimed the state is facing a far bigger budget deficit than earlier reported.
But according to ratings agencies, the situation will not change the state's rating outlook.
Fitch Ratings said NSW has room to deal with a possible $4.5 billion shortfall in the budget.
"That $4bn is not over one year, it's over four years," Fitch Ratings Sydney director Andrea Jaehne said.
Meanwhile, Australian bonds closed firmer.
The June 10-year bond futures contract price was at 94.515 (a yield of 5.485 per cent), up from 94.49 (5.51 per cent) on Monday, and the June three-year bond futures contract was at 94.93 (5.07 per cent), up from 94.91.
