/www.fxserver.com/ March 21, 2003
THE Australian dollar crept higher today but remained in a fairly tight range with dealers noting most investors appear content to await offshore developments and react to those, rather than attempting to set the market tone.
The US dollar has been markedly stronger over the last week as expectations grow that a conflict in Iraq would be over fairly quickly.
Since the start of the conflict yesterday Australian time, dealers said the US dollar had consolidated the gains and some profit taking had emerged, allowing the Australian dollar to solidify above the $US0.5900 level.
The domestic currency managed to contain itself in the early part of the session. At 1200 AEDT, the Australian dollar was at $US0.5926/31 compared with $US0.5921/26 at yesterday's close.
The conflict with Iraq was expected to improve the United States currency, but that strong move higher has not occurred at present.
However, there is also the potential for the Australian dollar to drift higher, particularly since it has shown good support near the one month lows reached earlier this week.
"Not a real lot going on at the moment really, we have been in a 10-15 point range so far since about 0700 AEDT this morning," a dealer from a domestic bank said.
"I think everyone is trying to digest what is really going on here. There is a lot of interest around to buy the currency around sub-$US0.5880.
"I think we could probably drift a little bit higher. There is enough support ... to see the market want to be a bit longer."
There is resistance expected to emerge around the $US0.5960 and 0.5970 area but a solid move above there could mean the Australian dollar rediscovers the 0.6000 level quite quickly.
The upside does seem plausible at present, unless there is a firm break down below the $US0.5850 area.
At 1200 AEDT the Australian dollar on the Reserve Bank of Australia Trade Weighted Index unchanged at 54.2 points from yesterday's close.