Dollar higher on less dovish RBA minutes

DOLLAR up after RBA minutes were interpreted as suggesting less chance of future rate cuts.

Dollar higher on RBA minutes

THE Australian dollar is higher after Reserve Bank minutes were less dovish than anticipated and ahead of what is expected to be a dovish testimony by the US Federal Reserve chairman.

At 12pm AEST today, the local unit was buying 92.22 US cents, up from 91.82 cents yesterday.

In the minutes of its July meeting, released yesterday, the RBA said it left the cash rate on hold at the record low of 2.75 per cent as it assessed the effects of earlier rate reductions as well as the falling, but still high, Australian dollar.

The comments were interpreted by some investors as being less dovish than expected, suggesting the prospect of further interest rate cuts was diminishing.

Easy Forex currency dealer Tony Darvall said the RBA remarks added strength to the local currency while the US dollar was being weakened by expectations Fed chairman Ben Bernanke would deliver dovish testimony to Congress tomorrow morning, Australian time.

"The strong Aussie dollar is half the story and expectations now that Bernanke will talk down tapering is why the US dollar is weak," Mr Darvall said.

"That's combining into a sharp rally."

Mr Darvall said the Australian dollar would be range bound, between 91.80 and 92.60 US cents, ahead of Dr Bernanke's testimony.

Meanwhile, Australian bonds were slightly lower.

At 12pm AEST the September 10-year bond futures contract was trading at 96.230 (implying a yield of 3.770 per cent), down from 96.240 (implying a yield of 3.760 per cent) yesterday.

The September three-year bond futures contract was at 97.240 (2.760 per cent), down from 97.260 (2.740 per cent).

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