The dollar pushed higher but the gaze of traders remained firmly on whether lawmakers in Cyprus can reach a deal on the proposed terms of an international bailout package.
As part of a rescue package for Cyprus, European policymakers have sought to place a levy on bank deposits in the country to raise 5.8 billion euros ($7.2 billion). The move has met fierce resistance locally and talks are ongoing to negotiate an alternative, with a vote in parliament needed to ratify the measures.
"The main event risk is clearly on the Cyprus vote, which is finely balanced," said Sue Trinh, senior currency strategist at RBC Capital Markets.
At 5.04pm AEDT, the Aussie fetched $US1.0380 compared with $US1.0366 late yesterday.
Alan Ruskin, global head of G10 FX strategy at Deutsche Bank, said despite the jitters from Europe the Aussie should hold its ground above parity for the rest of the year.
Although the greenback will likely strengthen as the US economy picks up and an end nears for quantitative easing, Mr Ruskin said a correction in the Aussie is unlikely.
"It's not a negative Aussie dollar story," he said.
Elsewhere, minutes from the Reserve Bank of Australia's most recent policy meeting suggested the bank can still cut rates if needed.
"While further reductions may be required, on the information currently to hand it was appropriate to hold rates steady," the RBA said in the minutes of its March 5 policy meeting, published today.
The RBA kept the benchmark cash rate target at 3 per cent for the second month in a row following the meeting, a low previously reached in the aftermath of the global financial crisis.
The central bank has lowered interest rates six times since November 2011 to help insulate the nation from weakness in the world economy, as well as to stoke non-mining sectors ahead of an expected peak in resources investment later this year that is expected to escalate job losses.
Earlier, RBA deputy governor Philip Lowe said the rate cuts were starting to have an impact across the economy, lifting house prices, consumer confidence and boosting retail spending.
"Available evidence does suggest that lower interest rates are doing their work broadly as expected," Mr Lowe said in a speech in Sydney.
