A holiday lull trapped the Australian dollar in a narrow trading range around $0.6900 on Wednesday, barely budging from $0.6911 seen here late afternoon on Tuesday and short of resistance around 70 US cents. The local dollar fared better on a battered British pound, gaining to as much as 0.4804 pounds, helped by a continuous decline in sterling as investors forecast more interest rate cuts and a vicious UK recession.
Dealers said new plans by the US government to help the auto sector gave some support to risk appetite, and thus the Aussie, bringing a quiet end to the worse-ever year on record for the currency. The Aussie has fallen about 21 percent against the US dollar this year, and shed 32 percent on the yen.
Traders also suspect the Aussie could soon slide again when investors return to focus on the weak Australian economy, which is flirting with its first recession in 17 years. "There is some positive sentiment on the US government's plan to keep General Motors from bankruptcy...but investors will focus on core fundamentals when they come back," said Francisco Solar, a senior dealer at Easy Forex.
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