The Australian dollar held steady near multi-month highs against the US dollar and yen on Thursday as investors took a breather from its recent sharp rally to see if the gains could be sustained. The Aussie was little changed at $0.6987, from $0.6991 late in local trade on Wednesday, and a touch weaker at 68.31 yen, from Wednesdays 68.50.
"If the Aussie rallies past $0.7250 toward $0.7500, and holds above this level for a significant period of time, this may represent a new paradigm," said Amy Auster, an analyst at ANZ Bank. Auster said a convincing rebound in the Aussie may flag an improvement in global economic fundamentals, although she was still sceptical it could sustain the rally given ongoing uncertainty on the health of the world financial system.
Australia is a major commodity exporter and is therefore vulnerable to any weakness in commodity prices. This ties the fate of the Aussie closely to the health of the world economy.
Tentative signs of improvement in the US economy pushed Asian stocks to a 11-week high on Thursday, boosting investor risk appetite and offering support to riskier assets such as the Aussie. The Aussie dropped to a low of NZ$1.2097, a level last seen on January 14, and from Wednesdays NZ$1.2391.
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