At 12.00pm AEDT, the dollar was trading at $US0.6983/88, up from Wednesday's close of $US0.6966/69.
Since 7.00am, the currency has moved between a low of $US0.693 and a high of $US0.6997.
ICAP senior economist Adam Carr said the local unit was expected to trade in a tight range throughout the day and into offshore trade as concerns grow about the issuance of bonds on US and UK markets.
During offshore trade overnight the US the central bank continued to buy up five-year Treasury bonds, while the UK saw a bond tender fail.
Britain experienced its first incomplete auction of government bonds in almost seven years, potentially dealing another blow to Prime Minister Gordon Brown's plans to resuscitate the faltering economy.
"We saw a very aggressive sell off of Aussie futures as a result," Mr Carr said.
"The US will be fine, because China has reaffirmed their commitment to US treasuries.
"But Britain is trying to play down the fact they didn't manage to sell all their bonds, but I think it was a one off."
He said the news made investors in the local currency wary, coming a day after the commonwealth government provided a temporary guarantee for States looking to raise money in international credit markets.
"For Australia, a day after the government guaranteed state debt, it does make the market look a little more closely at the Aussie and Kiwi markets," he said.
"It leads to a natural increase in risk aversion which harms the Aussie dollar."
Mr Carr said that optimistic comments from the Reserve Bank of Australia on the nation's housing market had failed to boost the currency.
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