Dollar boosted by greenback weakness

THE Australian dollar remains above 96 US cents as the greenback is left reeling from the US political budget and debt limit stand-off.

THE Australian dollar remains above 96 US cents as the greenback is left reeling from the US political budget and debt limit stand-off.

At 12pm AEDT today, the local unit was trading at 96.22 US cents, up from 95.52 cents yesterday.

US politicians at the last minute passed a budget bill to temporarily raise the debt ceiling and reopen the government.

But markets remain uncertain about what long-term impact the government shutdown may have had on the US economy, with Chinese ratings agency Dagong's downgrading of US debt from A to A-.

Westpac senior currency strategist Sean Callow said the greenback lost its safehaven bid, leaving the US dollar weaker against major currencies.

"Lasting damage has been done to the US dollar and its image in the world," Mr Callow said.

"Because we actually didn't get very close to the actual default date - there was no default potential until at least the 31st of October - that reinforces people's view that they probably don't need to worry too much about default but that the US political system is holding back the economy and will probably continue to do so.

"The whole episode has ended up being negative for the US dollar and it's given the US Federal Reserve another reason to maintain loose policy for longer."

Meanwhile, bond futures prices were higher.

At 12pm AEDT today, the December 10-year bond futures contract was trading at 95.920 (implying a yield of 4.080 per cent), up from 95.900 (4.100 per cent) yesterday.

The December three-year bond futures contract was at 96.920 (3.080 per cent), up from 96.900 (3.100 per cent).

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