Dollar unchanged despite Italian poll

DESPITE overnight rallies and falls in response to the Italian election results, the Australian dollar has remained unchanged.

DESPITE overnight rallies and falls in response to the Italian election results, the Australian dollar has remained unchanged.

At 12pm AEDT today, the currency was trading at 102.79 US cents, the same level as yesterday.

The Australian dollar rose as high as 103.30 US cents overnight before falling after the Italian election result.

Based on votes counted so far, the election is expected to result in political deadlock, with Democratic Party leader Pier Luigi Bersani controlling the lower house and former Prime Minister Silvio Berlusconi's party dominating the upper house. Mr Bersani has indicated he will continue unpopular austerity measures aimed at improving Italy's finances while Mr Berlusconi campaigned on a populist, anti-austerity platform.

The Aussie dollar fell to 102.49 US cent around 9am today AEDT after Reserve Bank of Australia (RBA) assistant governor Guy Debelle said the central bank had scope to cut the cash rate further to offset the effects of the currency's high value.

But Commonwealth Bank currency strategist Peter Dragicevich said the Australian dollar had been relatively well-supported, considering the negative tone in markets following the Italian election results.

"It's surprisingly resilient, given the negativity we saw stemming from the Italian election result.

"We're still pretty much stuck in the range we've been in for a while now."

Mr Dragicevich said developments in Italy would continue to be a major driver on currency markets over the next few days.

But, he said, traders would also be closely watching US Federal Reserve chairman Ben Bernanke's testimony to Congress overnight.

"We expect Bernanke to be quite dovish and to reiterate that the Fed is maintaining its easing policy," he said. "So, that should see the Aussie dollar grind up a little bit from where it is."

Meanwhile, Australian bond futures prices were higher at noon. At 12pm AEDT today, the March 10-year bond futures contract was trading at 96.610 (implying a yield of 3.390 per cent), up from 96.525 (3.475 per cent) yesterday afternoon. The March three-year bond futures contract was at 97.210 (2.790 per cent), up from 97.140 (2.860 per cent) previously.