The Australian dollar moved higher with traders largely shrugging off Julia Gillard's surprise calling of a September 14 election.
The announcement stunned political pundits but elicited little reaction in currency markets.
At 4.30pm AEDT, the dollar was buying $US1.0470 - up from $US1.0452 in late trading yesterday. The September date is some way off and largely anticipated by the market, Westpac currency strategist Sean Callow said.
The lengthy election campaign could dampen consumer confidence, some analysts warn.
It raises pressure on the Reserve Bank of Australia to cut interest rates over coming months, they say.
"Given the long period of this campaign it is likely that rates will be adjusted," interest-rate strategist Nomura Martin Whetton said.
"While this would generally be seen to favour the incumbent, if it is due to lower activity levels and higher unemployment, this advantage could be erased."
The early election call might give some certainty to business investment planning, benefiting the economy, ANZ currency strategist Andrew Salter said.
"Companies can plan for the future which at this stage the markets and polls strongly suggest will include a change of government," Mr Salter said.
The next focus for the Australian dollar will be the RBA's policy meeting next Tuesday. Financial markets are pricing in a 20 per cent chance of an interest-rate cut.
Meanwhile, economists are weighing the cost to the economy of floods in Queensland and NSW. In 2010 flooding shut down coal production in Queensland, stalling the economy.
"There may be a modest reduction in export output in the March quarter that will be recovered over the June and September quarters," CommSec chief economist Craig James said.
Heading into the European session, a meeting of the US Federal Open Markets Committee will shape trade. It isn't expected to contain any surprises in current policy settings, RBC Capital Markets currency strategist Michael Turner said.
