Investors were also a little cautious ahead of Thursday's October employment data, especially given the Australian central bank's vigilance on the risk of a tight labour market feeding into wage inflation.
So far, the Reserve Bank of Australia (RBA) has seen nothing to warrant raising its 5.5 percent cash rate and the market consensus is for interest rates to remain on hold well into 2006.
"If tomorrow's employment data and next week's Labour Price Index are to the strong side, the RBA may feel the need to hike in December," said Stephen Koukoulas, chief strategist, Asia Pacific, at TD Securities.
"This call is still a long shot, but the odds of a rate hike from the RBA are significantly greater than the zero percent priced into the market," he said.
Market expectations centre on the addition of 10,000 jobs to the economy and an unemployment rate steady at 5.1 percent, a result which is unlikely to alter the steady rate outlook. The US dollar held near two-year highs against the euro and yen, with analysts expecting its recent rally through key technical levels to spur more gains in coming days.
One Aussie fetched $0.7341/46, in the middle of the day's tight $0.7330-$0.7352 range. It staged a rebound overnight, mirroring price action in the euro, to lift off Tuesday's one-year low at $0.7285.
Option-related demand is expected at $0.7300 and with key chart support below that at $0.7240, while resistance is seen at $0.7365.
Globally, there is a heavy bias towards speculative long positions in the US dollar, as shown in International Monetary Market (IMM) currency futures, which are used by traders to second guess market direction.
"The US dollar has benefited from a favourable combination of improving risk appetite and more supportive yield differentials," said Ashley Davies, currency strategist at UBS.
The margin between Australia and US bond yields has narrowed rapidly as investors ramp up expectations of further tightening by the Federal Reserve.
Many analysts now see the Fed boosting the fed funds rate as high as 5 percent, with futures markets predicting a growing chance of a rate rise in March. Moves in December and January are already fully priced in.