The Australian dollar held fast on Wednesday as investors, having been caught off-guard by this week's choppy trade, waited on the sidelines ahead for the outcome to a US central bank policy meeting. Traders said they were wary of waging big bets on the currency for now because investors are undecided about whether recent weakness in markets was just a pull-back in an uptrend, or the start of a more protracted sell-off.
One trader said some investors were reluctant to short the Aussie at these levels after short sellers were squeezed when the Aussie zoomed to an eight-month high of $0.8265 on June 3. Aussie was steady at $0.7951, off a high of $0.7980 hit offshore, but still up from $0.7805 seen here late Tuesday thanks mainly to a rally in the euro.
The euro has shot higher in the past 24 hours, partly on talk of demand ahead of an unlimited one-year ECB lending operation. It was up on the yen as well at 75.87, from a near four-week low of 74.27 struck Tuesday.