The Australian dollar has closed relatively flat as investors hold out to see how European markets react to Italy's election results.
At 1700 AEDT on Tuesday, the currency was trading at 102.82 US cents, slightly up from 102.79 US cents on Monday.
RBC Capital Markets senior economist Su-Lin Ong said the local unit traded within a very tight range during the Sydney session, after solid movements overnight.
The Australian dollar rose as high as 103.30 US cents on Monday night before falling in response to the Italian election result.
"Most of the movements happened overnight as it became a bit clearer what was happening with those Italian elections," Ms Ong said.
"I think the Aussie is just marking a little bit of time to see ... the European markets open up properly and their take on what looks to be a bit of a hung parliament and stalemate in Italy."
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.
Ms Ong said, in the absence of any real domestic drivers, comments by Reserve Bank of Australia (RBA) assistant governor Guy Debelle sparked a little bit of movement on the local unit.
Mr Debelle said the central bank had scope to cut interest rates, if needed, to offset the effect of the high Australian dollar.
"That weighed a little bit on the currency as well," Ms Ong said.
She said investors will also be keeping a close eye on the US Federal Reserve chairman Ben Bernanke's congressional testimony overnight.
"Markets are looking for any signs of whether there'll be the discussion over exit from QE (quantitative easing)," he said.
"We think he'll hose down any speculation of that and confirm that settings will remain extremely accommodative and that QE is set to continue for some time."
At 1700 AEDT, the Australian dollar was trading at 94.58 Japanese yen, down from Monday's local close of 96.81 Japanese yen.
The unit was at 78.73 euro cents, down from 77.87 euro cents previously.
Meanwhile, the Australian bond market closed firmer.
At 1630 AEDT on Tuesday, the March 10-year bond futures contract was trading at 96.645 (implying a yield of 3.355 per cent), up from Monday's close of 96.525 (3.475 per cent).
The March three-year bond futures contract was at 97.260 (2.740 per cent), up from 97.140 (2.860 per cent) previously.