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$A lower as wary investors await US FOMC

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Published on: Wednesday, August 21, 2013

The Australian dollar is lower as investors remain wary ahead of the release of the closely watched US Federal Open Market Committee (FOMC) July minutes.

At 1200 AEST on Wednesday, the local unit was trading at 90.24 US cents, down from 90.45 cents on Tuesday.

Westpac senior currency strategist Sean Callow said it was a quiet day for the Aussie following Tuesday's "wild ride" which saw heavy losses for the local currency.

He said markets would remain quiet ahead of Thursday morning, Australian time, when the minutes would be released, giving a possible indication of when the US Federal Reserve will begin tapering its economic stimulus program.

"The main theme yesterday was panic in emerging markets, so there were very heavy losses in a lot of Asian currencies and elsewhere around the world," Mr Callow said.

"There are a lot of nerves and worries about capital outflows and that tends to spill over to the Aussie.

"The Aussie has been a major beneficiary of capital flows into the region after the global financial crisis, so if the Fed's change of policy causes some of that capital to be pulled back to the US, then the Aussie will suffer some collateral damage.

"The trade ahead of the minutes is very wary and I'd be surprised if we saw very sharp moves before that."

Meanwhile, Australian bond futures prices were higher.

At 1200 AEST, the September 10-year bond futures contract was at 96.045 (3.955 per cent), up from 96.020 (3.980 per cent) on Tuesday.

The September three-year bond futures contract was at 97.240 (2.760 per cent), up from 97.220 (2.780 per cent).


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