Australian dollar shrugs off political limbo

Australian PM Malcolm Turnbull has said he still expects to get enough seats to form a new administration

The Australian dollar shrugged off the political uncertainty in the country after elections over the weekend were too close to call.

The dollar started about 0.4% lower around $0.7435 though it later edged back up to $0.7516 in light trading.

Australia's ASX/S&P 200 share index fell at first, but closed up 0.7% at 5,281.78 due a rally in commodities.

Neither the ruling Liberal-National Coalition nor the opposition Labor parties secured an outright majority.

The result will not be decided until at least Tuesday, which is when vote-counting resumes.

The uncertainty, together with an increased risk of Australia having its "AAA" credit rating cut has "dented" the country's currency, according to Vishnu Varathan from Mizuho Bank.

Australia's central bank is also expected to hold fire at its policy meeting on Tuesday, analysts at Capital Economics said.

"The fallout on the economy and financial markets from the uncertain outcome of the Federal election will probably be relatively mild and short-lived and is unlikely to prompt the Reserve Bank of Australia to cut interest rates from 1.75% to 1.50%.

"It is concerns over the weak outlook for inflation, not the political outlook, that will trigger a rate cut to 1.50% in August," Capital Economics said.

Elsewhere in Asia, markets were mostly higher as traders turned their focus from the UK's decision leave the EU to the prospect of policymakers unleashing more easing measures to boost growth.

Japan's Nikkei 225 share index closed 0.6% higher at 15,775.80, while South Korea's Kospi index ended up 0.4% at 1,995.30.

In Greater China, the Shanghai Composite closed 1.9% higher at 2,988.60 while in Hong Kong the Hang Seng index finished trading 1.3% up at 21,059.20 points.