Dollar hits one-week low

THE Australian dollar is more than one US cent lower, weighed down by a combination of factors.

THE Australian dollar is more than one US cent lower, weighed down by a combination of factors.

At 12pm AEDT today, the local unit was trading at 102.52 US cents, down from 103.65 cents yesterday.

The currency reached an overnight low of 102.43, its weakest level since Tuesday of last week.

Early this morning, Sydney time, the US Federal Reserve released the minutes of its January policy meeting. They showed that some members were worried that the bond-buying programs could eventually escalate inflation and unsettle financial markets.

IG Markets analyst Chris Weston said the Australian dollar and other risk assets were falling ahead of the release of the minutes.

"It did fall afterwards because the US dollar got a bit of a boost," he said. "A lot of the damage was done going into the minutes."

"There is no one smoking gun from what I can see - we did see some weaker US housing starts numbers, there had been some rumours that a US hedge fund was liquidating some sizable positions in a number of asset classes."

Mr Weston said falling gold prices were also putting downward pressure on the Australian dollar.

"What we've got to remember while the iron ore price is holding up quite nicely our fourth biggest export is gold and if gold prices are getting smashed then there are going to be headwinds for the Australian dollar," he said. "I wouldn't be looking to buy gold at all."

Tomorrow, Reserve Bank of Australia governor Glenn Stevens will appear before the House of Representatives committee.

"I think that is going to be the next catalyst," Mr Weston said. "There are going to be a lot of questions about he strength of the Australian dollar."

"There has been this thing from Glenn Stevens and the RBA talking quite vividly about the Australian dollar's strength, while at the same time not acting on it."

Meanwhile, the Australian bond market was firmer. At 12pm AEDT today, the March 10-year bond futures contract was trading at 96.465 (implying a yield of 3.535 per cent), up from 96.440 (3.560 per cent) yesterday. The March three-year bond futures contract was at 97.130 (2.870 per cent), up from 97.090 (2.910 per cent).