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SYDNEY, Feb 26 AAP

February 26 2013, 07:22AM

The Australian dollar is higher, despite losing ground after Italian election results added to concerns the debt-ladened country could abandon austerity measures.

At 0700 AEDT on Tuesday, the currency was trading at 102.89 US cents, up from 102.79 US cents on Monday afternoon.

HiFX senior trader Stuart Ive said the Australian dollar rose as high as 103.30 US cents overnight before falling as low as 102.62 US cents on the Italian election result.

Exit polls showed Democratic Party leader Pier Luigi Bersani and his leftist coalition were poised to defeat former prime minister Silvio Berlusconi, who has campaigned on a populist anti-austerity platform, in the lower house.

But the polls also showed Mr Bersani's party might fail to win the upper house, which appeared to be leaning towards Mr Berlusconi's party.

"What that all comes down to is Italian politics is in a bit of a mess. It does look like they are headed for another round of voting because of the hung state of it all," Mr Ive said.

Mr Ive said the Australian dollar found some support early on Tuesday and had lifted from its lows.

But, he said, the Italian election result could continue to weigh on the Australian dollar during Tuesday's local session by driving investors away from risk assets and towards safe-haven investments like bonds.

He said markets would also be watching developments in Japan, where a new governor of the Bank of Japan is expected to be announced soon.