Confidence will remain very fragile in the short term which will limit the scope for net Australian dollar gains, but there is scope for underlying net gains against the US currency.

The Australian dollar was subjected to renewed selling pressure on Tuesday with lows below the 0.65 level against the US dollar before a tentative recovery. The currency was unsettled by renewed selling pressure on major stock markets and increased fears over the global economy as underlying stresses persisted.

There was a recovery in consumer confidence according to the latest Westpac index following a sharp decline the previous month, but the domestic influences were limited and attention is likely to remain focussed on the international trends.

The Australian dollar edged back to just above the 0.66 level in Europe on Wednesday as European bourses attempted to rebound, but was struggling to sustain gains, especially with industrial commodity prices still weaker.