The Australian dollar lost a bit of ground today, but held on to most of last week's hefty gains on optimism that Europe will soon come up with a concrete plan to tackle its debt crisis.
The Aussie last traded at $US1.0301, down from $US1.0341 late in New York on Friday, where it scaled a one-month peak of $US1.0347.
Last week's near 6 per cent rally, which was the Aussie's biggest weekly move in over two years, has lifted it towards key resistance at $US1.0380, the 200-day moving average and then $US1.0399, the September 16 high.
"Given the speed of the rally, a little bit of unwind doesn't seem unwarranted," said Grant Turley, strategist at ANZ in Sydney.
Traders said the Aussie might struggle to push above those levels for now while markets await further developments in the euro zone.
Hopes have mounted that Europe will announce a comprehensive plan to resolve its debt crisis and recapitalize its banks at a key summit this weekend.
Adding to the sense of urgency, the world's leading economies at a G20 meeting pressed Europe to act decisively within eight days to resolve the debt crisis.
But if EU leaders disappoint at the October 23 summit, markets could very quickly turnaround. In any case, traders expect market volatility to pick up later in the week ahead of the outcome of the summit.
Reuters