THE Australian dollar strengthened today, boosted in part by an improving sharemarket performance in Australia.
Despite the gains, however, traders and analysts noted that more increases might not be on the cards in the coming days as global risk-tolerance remains low and resistance looms close for the currency.
In addition, Nick Socratous, head of global foreign exchange for HSBC Australia, said a bounce back in the currency in recent days appears to be slowly running out of steam.
"The best thing we can look at is the technical picture - it went down 10 per cent last week and we have retraced half of that. Above $US1.05, it will encounter some resistance," said Mr Socratous.
At 3.55pm AEST, the Australian dollar was at $US1.0489, up from $US1.0474 late yesterday. Against the Japanese yen, the Australian dollar was at Y80.42, up from Y80.495.
Mr Socratous added that recent buyers had cited "the same old reasons to buy - yield and the China commodities story".
For the Australian dollar to push higher and breach $US1.0500, it will require a sharp paring of bets that the Reserve Bank of Australia will ease policy, coupled with improved sentiment on global growth prospects, said John Kyriakopolous, head of forex strategy at National Australia Bank.
"While investors worry about a sharp global economic slowdown, they are likely to continue pricing in RBA rate cuts," said Mr Kyriakopolous.
Richard Grace, chief currency strategist at Commonwealth Bank of Australia, said that while market volatility continued to ease, funding constraints in Europe had not subsided.
"It is probably worth paying attention to near-term movements in the three-month euro basis swap for a guide to a potential spike in market volatility and a dip in the Australian dollar," Mr Grace said.
