The dollar was higher late today after the central bank signalled that, while another interest rate cut was possible, it was in no mood to deliver it just yet.
At 4.05pm AEDT, the Aussie was trading at $US1.0324, up from $US1.0296 late yesterday. It traded as high as $US1.033 in Asia.
The Reserve Bank of Australia has cut interest rates by 1.75 percentage points since November 2011, a reduction it describes now as "substantial".
In the minutes of its February 5 policy meeting, the RBA said it was seeing early signs that previous cuts were starting to flow through to the economy.
While there is scope to lower rates further thanks to contained inflation, the RBA said it would need to see further clear signs of a slowdown in the economy.
Rate were left on hold this month as "monetary policy was already accommodative as a result of the substantial easing of policy of the past 15 months, and that this stimulus was continuing to work its way through the economy", the RBA said.
Ben Jarman, economist at JPMorgan, said the RBA appeared content to sit back for a while and let the economy digest the "substantial" easing already delivered.
He said data next week on mining investment in the fourth quarter of 2012 would set the tone for the RBA over the coming months.
A sharp weakening in investment will sharpen expectations of a cut in interest rates next month. Financial markets were today pricing in just a 25 per cent chance of a cut in rates in March.
An element of sovereign risk also crept in the currency market today when Greens leader Christine Milne said her minor party would no longer work closely with the Labor government. A formal alliance between the Greens and Labor has been in place since 2010.
While essential funding bills will be supported in parliament to keep Labor in government, Ms Milne said that that was where the co-operation would start and finish from now on. The news momentarily pushed the dollar lower.
Still, the outlook for the Aussie remains robust.
Greg Gibbs, currency strategist at RBS in Singapore, said Australia's strong sharemarket might be a reason to expect the dollar would rise in the near term.
The sharemarket has been one of the strongest performers globally since the start of the year, which is partly due to rising foreign capital flows.
"A development we need to give more consideration to is the strong and outperforming Australian equity market over recent months. It suggests that the recent relative softness in the Australian dollar may not last," Mr Gibbs said.
