Dollar falls as QE3 optimism wears off

THE Australian dollar is lower as optimism following announcements by the US Federal Reserve and the European Central Bank (ECB) wear off.

THE Australian dollar is lower as optimism following announcements by the US Federal Reserve and the European Central Bank (ECB) wear off.

At 12pm AEST today, the local unit was trading at 104.20 US cents, down from 104.56 cents yesterday.

Last week, the US central bank's Federal Open Markets Committee (FOMC) announced a third round of quantitative easing (QE) in an effort to kick start the US economy.

The previous week, the ECB increased powers for its bailout fund.

CMC foreign exchange dealer Tim Waterer said the market's mood has changed since the initial euphoria of those two announcements.

"It seems that traders in general are just taking stock of the recent announcements overseas from the ECB and the FOMC," he said.

"All of that was on the back of a general questioning of whether the market got ahead of itself in celebrating QE3, which has given pause to a lot of risk assets.

"It looks like the Australian dollar is suffering a a little bit due to the softening of commodity prices as well."

Mr Waterer said markets are now waiting the release of HSBC Chinese manufacturing activity index for September, which is due out tomorrow.

Meanwhile, Australian bond futures prices were higher at noon.

At 12pm AEST today, the December 10-year bond futures contract was trading at 96.770 (implying a yield of 3.230 per cent), up from 96.765 (3.235 per cent) yesterday.

The December three-year bond futures contract was at 97.420 (2.580 per cent), up from 97.400 (2.600 per cent).