By James Glynn SYDNEY--The Australian dollar was lower Thursday, although it was able to trim its early losses through the Asian trading day as market sentiment across the region improved. Greg Gibbs, currency strategist at Royal Bank of Scotland, based in Singapore, said the Australian dollar actually lagged behind the strong improvement in other Asia-region currencies such as the Malaysian ringitt, which rallied as the U.S. dollar fell. Attention remains fixed on the U.S. budget impasse, which Mr. Gibbs said has the potential to shake global confidence if it drags on much longer. The longer the standoff persists, the greater the risk there is to U.S. growth, and the increased chance it will muddy the debate surrounding the U.S. Federal Reserves plans to wind back its monthly bond-buying program, he said. "A prolonged shutdown would fuel risk aversion, which would be negative," Mr. Gibbs said, forecasting ongoing volatility and big sentiment shifts in global markets over the coming week. At 0800 GMT, the Australian dollar traded at US$0.9383 compared with US$0.9368 late Tuesday in Asia. Earlier, it traded around US$0.9340. "The political impasse in Washington continues leaving the dollar vulnerable across the board," Citigroup said in a note to clients. "More games of chicken between the Democrats and the Republicans could mean that U.S. Dollar underperformance against other majors...is here to stay," it added. There were no major domestic data published in Australia Thursday.

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