Dollar lower after news from Fed and China

SLIGHT bounce for dollar after hitting almost three-year low on back of weak Chinese data and US Fed stimulus windback.

Dollar lower on Fed, China news

THE Australian dollar has had a slight bounce after hitting an almost three-year low on the back of weak Chinese manufacturing data and US Federal Reserve comments about winding back its stimulus program.

At 12pm AEST, the local unit was trading at 92.43 US cents, slightly up from 92.29 cents yesterday.

Just after midnight, the local unit dropped to 91.90 US cents, its lowest point since September 2010.

The local share market also continued to fall in the wake of US Fed chairman Ben Bernanke's statement that the US central bank could wind up its $US85 billion-a-month stimulus program by mid-2014 if the US economy continued to pick up.

The announcement has seen major currencies fall against the surging US dollar in offshore trade overnight, along with US stocks which have dropped more than two per cent.

News out of China yesterday also dealt markets a blow, with a preliminary HSBC report showing that manufacturing activity in China had fallen for a second, consecutive, month.

Easy Forex currency dealer Tony Darvall said movements on the markets had led to "safe-haven demand" for the US dollar as investors look for reassuring comments from Federal Reserve officials about Dr Bernanke's comments.

"When things go bad, people flood to the US dollar," said Mr Darvall.

He said the Australian dollar would likely continue on a downward trend in the long term.

"The reason why the market has moved so much is that people think the medium to long term has changed," he said.

"The Australian dollar can easily get down to 85 or 80 US cent within six months."

Meanwhile, the Australian bond market was weaker.

At 12pm AEST today, the September 10-year bond futures contract was trading at 96.255 (implying a yield of 3.745 per cent), down from 96.350 (3.650 per cent) yesterday.

The September three-year bond futures contract was at 97.190 (2.810 per cent), down from 97.260 (2.740 per cent).

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