The Australian dollar is trading a third of a US cent higher this morning, after recovering some losses from yesterday, when the central bank chose to keep interest rates on hold.
At 0700 AEST, the Australian dollar was trading at 107.23 US cents, up from 106.89 cents on Tuesday.
Since 1700 AEST on Tuesday, the currency has traded between 106.86 US cents and 107.38 US cents.
The local currency reached 110.11 US cents on May 3, a record high since the currency was floated in December 1983.
Bank of New Zealand currency strategist Mike Jones said the domestic currency had a relatively solid overnight session, after falling sharply on Tuesday in reaction to the Reserve Bank of Australia's (RBA) decision to keep the cash rate at 4.75 per cent for the time being.
"In all, it recovered most of yesterday's RBA-inspired losses through the overnight session," Mr Jones said.
The US dollar weakened overnight after a Chinese official warned against "excessive" holdings of US assets, he said.
Early on Wednesday (AEST), Federal Reserve Chairman Ben Bernanke expressed concern about the state of the US economy, which dragged the US dollar even lower.
Mr Bernanke warned there had been a "loss of momentum" in the US jobs market but predicted employment growth would eventually pick up.
The Fed chairman also pointed to the moribund housing market, as evidence that the Fed's stimulative policies needed to be maintained.
On Wednesday, the Australian Bureau of Statistics releases housing finance figures for April.
Mr Jones said traders would be watching the data, given the slowing of domestic and credit demand in Australia.
"I think if we did see any slowing in those figures, there would probably be another piece of evidence that suggests the RBA will keep rates on hold over the next few months, hence keeping the Aussie dollar in check."
Mr Jones said the local currency could trade between 106.80 US cents and 107.50 US cents during the local session on Wednesday.
