The Australian dollar edged off multi-month lows on Wednesday after ratings agency Standard & Poor's reassured that Australia's top sovereign grade was safe, though jitters over eurozone stability kept risk appetite limited.

The Aussie steadied at $US1.0226, having found some comfort following an S&P report saying that Australia's robust credit fundamentals supported its top credit rating.

While the country had some vulnerabilities, the ratings agency said they were largely mitigated for now.

Investor sentiment was also underpinned by firmer equities after the head of the US Federal Reserve reassured markets of its commitment to strong monetary stimulus.

The currency had skidded as far as $US1.0200 overnight, its weakest since October.

Growth-linked currencies were hit hard this week as Italy's deadlocked election triggered a huge fall in euro/yen, which spilled over into other crosses. Markets remained wary of developments in the eurozone.

"Overall, the mood is quite mixed... People are concerned about what's happening in Europe, data (in Australia) was a bit soft today and it was a bit soft in China as well (earlier this week)," said Greg Gibbs, a strategist at Royal Bank of Scotland in Singapore.

Data out in Australia showed the value of construction work done fell 0.1 per cent in the fourth quarter versus forecasts of a rise of 1.5 per cent.

"There is so much happening in the world at the moment that it definitely adds an element of downside (to the Aussie)."

Markets imply a one-in-three chance of a quarter point easing to a record low of 2.75 per cent when the Reserve Bank of Australia meets next week.

Sovereign bonds were major beneficiaries, extending their recent climb to one-month highs and tracking a similar move in US Treasuries.

Australia's three-year bond futures contract gained 0.04 points to 97.300, having pierced key resistance at 97.283.

The 10-year contract rose 0.050 points to 96.695, its strongest since late January and looked set to test 96.771, the 38.2 per cent retracement of the June-February fall.

Reuters