$A lower as Italy stays in deadlock
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The Australian dollar is more than half a US cent lower as uncertainty about the Italian election result weighs on market sentiment.
At 1700 AEDT on Wednesday, the local unit was trading at 102.16 US cents, down from 102.82 cents on Tuesday.
It fell to 102 US cents early on Wednesday morning, its lowest level since early October.
Italian centre-left Democratic Party leader Pier Luigi Bersani scraped a razor-thin victory in the lower house of parliament but no party was able to win a majority in the senate.
Forex.com research analyst Chris Tedder said Italy was in a very fragile political position that won't be easy to solve.
"It can go back to the polls or the two top parties can work together, which is a lot easier said than done considering the massive gap in political dogmas between the two parties," he said.
Mr Tedder said the Australian dollar got a little boost the jump in US new home sales and after US Federal Reserve chairman Ben Bernanke played down the possible end to the Fed's economic stimulus program.
"Encouraging economic data out of the US and Bernanke's reassurance, that the Fed's quantitative easing program is doing more good than harm, is helping to lift investor sentiment after risk assets took a hammering on the back of Italy's disappointing election result," Mr Tedder said.
In Australia on Thursday, official capital expenditure and expected expenditure data for the December quarter will be released, which is expected to be watched closely by the market.
Mr Tedder said the greater focus for markets would be further post-election developments in Italy and an Italian bond auction, worth four billion euros ($A5.14 billion).
At 1700 AEDT, the Australian dollar was at 93.71 Japanese yen, down from Thursday's close of 94.58 yen, and at 78.18 euro cents, down from 78.73 euro cents.
Meanwhile, Australian bond futures prices were higher.
UBS interest rate specialist Matthew Johnson said data showing a 0.1 per cent fall in domestic construction work done added to the pessimistic tone of the day.
Mr Johnson said there were concerns about the unclear Italian election result and worries over the possibility of a US government shutdown if Congress and the White House could not agree on proposed budget cuts.
"I think people are a bit short, or have been a bit short, so the weak data (construction) today was not a huge deal," Mr Johnson said.
At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.690 (implying a yield of 3.310 per cent), up from 96.645 (3.355 per cent) on Tuesday.
The March three-year bond futures contract was at 97.290 (2.710 per cent), up from 97.260 (2.740 per cent).