The Australian dollar re-tested its offshore high on Thursday and is just over a half US cent from its 2004 peak, but its near term direction is still likely to hinge on the fortunes of the euro.
Recent mixed comments from European Central Bank officials suggest the central bank is not about to take action to curb the high-flying euro, which means the US dollar will become entrenched in its downtrend again, supporting the Aussie.
"Finance ministers and central bankers are not unhappy with the depreciation in the US dollar and appreciation in their own currencies as long as it not volatile and reflective of fundamentals," said Robert Rennie, chief currency strategist at Westpac.
The AUD was $0.7729/34 compared with $0.7698/7703 late here on Wednesday, still short of this month's six-and-a-half year high of 78.13 cents, but well clear of the $0.7529 low seen earlier in the week.
However, while Rennie thinks the AUD can set new highs, it may be restrained by a $1.24/$1.29 range in the euro versus the big dollar.
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