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$A lower after US Fed minutes

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Published on: Thursday, November 21, 2013

by AAP

Increasing expectations that the US central bank will soon wind back its economic stimulus program has pushed the Australian dollar to its lowest level in six days.

At 1200 AEDT on Thursday, the local unit was trading at 93.23 US cents, down from 93.96 cents on Wednesday.

During the morning the currency dropped as low as 93.22 US cents, its weakest level since November 15.

Early on Thursday morning, the US Federal Reserve released the minutes of its October policy meeting which left the $US85 billion-a-month bond purchase program in place.

But chairman Ben Bernanke said the program would be tapered if economic data continues to improve.

FXCM market analyst David de Ferranti said the statement pushed the greenback higher against most major currencies, which pushed the Australian dollar lower.

"A set of hawkish minutes from the Federal Open Market Committee underpinned a dramatic turn lower for the Australian dollar overnight," he said.

"While recent data has been encouraging, the Fed is still mindful of significant weakness in the US labour market which makes it unlikely the central bank will taper at its upcoming December meeting.

"However, traders base their decisions on expectations, and with a signal from the committee that tapering is on the way, we may continue to see renewed demand for the US dollar - provided there is a sustained improvement in US economic data."

On Thursday evening, RBA governor Glenn Stevens will give a speech on the 30th anniversary of the floating of the Australian dollar at a business function.

Meanwhile, the Australian bond market was weaker.

At 1200 AEDT, on Thursday, the December 10-year bond futures contract was trading at 95.730 (implying a yield of 4.270 per cent), down from 95.780 (4.220 per cent) on Friday.

The December three-year bond futures contract was at 96.830 (3.170 per cent), down from 96.860 (3.140 per cent).


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