The Australian dollar consolidated under its offshore high of around 71 US cents on Wednesday after bounding higher on broad weakness in the US dollar as investor concern over the impact of high oil prices on economic growth grew.
The USD managed to stabilise in Asian trading, although there is debate as to whether this is the beginning of a renewed downturn in the currency, giving a reprieve for the Aussie after being hammered to seven-month low under 68 cents last week.
The AUD was $0.7086/91, compared with $0.6997/7002 late here on Tuesday.
"In the past, the US dollar has tended to appreciate before the start of Fed monetary policy tightening phases and then give up ground once interest rate increases start," said Stephen Roberts, director of research at Grange Securities.
"If this is again the pattern over coming months, the weakening US dollar will add to inflation pressures already showing in the US," he said.
The USD has been gaining ground in recent weeks in anticipation of the Federal Reserve starting its interest rate tightening cycle in June - from a 45-year low, one percent fed funds rate - cutting into the Aussie's huge yield advantage.
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