Aussie dollar holds most gains despite slight ease in offshore trade

The Australian dollar held on most gains despite slightly dropping in offshore trade as the greenback firmed and global equity markets softened.

At the Asian open on Wednesday, the local unit was trading at 72.16 U.S. cents, down from 72.29 U.S. cents at Tuesday's close. The Australian dollar continued the slide, trading at 71.87 U.S. cents at 0955 local time (AEDT).

Though sentiment in benchmark oil and offshore equities turned overnight, prices for iron ore kept creeping higher to sustain a price above 50 U.S. dollars per tonne for the first time since October, supporting the local unit given Australia's terms of trade will then likely increase for the first quarter, Commonwealth Bank of Australia chief currency strategist Richard Grace said.

The downside risk to Australian dollar was apparent, however, despite some local strategists indicating momentum in the unit is continuing, with technical analysts suggesting the unit could trade as high as 74 U.S. cents.

"An easing of iron ore prices may dampen the Australian dollar but it is not likely to significantly depreciate," Grace said.

"The recent lift in iron ore prices looks to be driven by the weather-related supply-side disruptions in Port Headland, as well as the impact from the burst dam in Brazil in late 2015, and seasonal re-stocking by Chinese steel mills following the Lunar new year holiday." Endit