Dollar higher after Bernanke disappoints

THE Australian dollar was close to one US cent higher today, reflecting broad-based US dollar weakness after a speech by the leader of the US central bank left markets cold.

THE Australian dollar was close to one US cent higher today, reflecting broad-based US dollar weakness after a speech by the leader of the US central bank left markets cold.

At 0700 (AEST) today, the Australian dollar was trading at 105.81 US cents, up from 105.02 US cents on Friday.

Since 1700 (AEST) on Friday, the local unit traded between 104.66 US cents and 105.92 cents.

HiFX senior trader Stuart Ives said the Australian dollar was higher on broad-based US dollar weakness, after a speech by the leader of the US Federal Reserve disappointed markets on Friday night.

In the heavily anticipated speech, US Federal Reserve chairman Bernanke offered no hints that the central bank would adjust monetary policy to give the near-stagnant US economy a shot of adrenalin.

Instead, he said the Fed was "prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability".

"If anything, Bernanke's speech at Jackson Hole disappointed the markets to a certain degree," Mr Ives said.

"The (Fed) would, rightly, be looking at the results of QE1 and QE2, and saying, I don't think the outcome has really been what we expected.

"So, at this moment in time, printing more money is probably not the best solution."

Equity markets initially fell when Mr Bernanke proposed no new steps to boost the economy, but soon regained ground to close the session higher.

Investors were encouraged by the fact that the Fed would now meet in September for two days, instead of the one day originally planned, to discuss its options to help the economy.

Mr Bernanke also said he expected growth in the second half of the year to improve after a first half in which expansion was nearly stagnant, at a rate of less than one per cent.

Mr Ives said with Jackson Hole out of the way, the focus would return to Europe and the sovereign debt problems plaguing its weakest nations.

He said there was little news of economic significance due out domestically today.

"I think we will see a little bit of consolidation (of the AUD) today," he said.

"Overall, we will probably end this week higher than we currently are at."

In economics news today, the Housing Industry Association is due to release new home sales figures for July.

Mr Ives said the Australian dollar was likely to trade in a range between 105.00 US cents and 106.00 US cents during the domestic session today.