Dollar remains below US95c

THE dollar fell to a fresh two week low as a combination of central bank factors weigh on the currency.

RBA governor Glenn Stevens yesterday said commodity prices will fall, putting sustained downward pressure on the Australian doll

THE Australian dollar fell to a fresh two week low as a combination of central bank factors weigh on the currency.

At 12pm AEDT today, the local unit was trading at 94.69 US cents, down from 95.05 cents yesterday.

The currency fell below 95 US cents for the first time in three weeks after Reserve Bank of Australia governor Glenn Stevens yesterday said the Australian dollar was overvalued and would get "materially lower".

During morning trade today, the currency fell as low as 94.66 US cents, its weakest level since October 14.

CMC Markets chief market analyst Ric Spooner said US dollar buying, together with the RBA governor's comments, had seen the Australian dollar continue to fall.

"Selling in the Aussie is showing signs of developing momentum, meaning that the US Federal Reserve meeting and tomorrow's Australian building approvals could be quite significant events for currency traders," he said.

"If the news flow happens to go with a Fed statement that's not as dovish as anticipated, plus disappointing building approvals locally, selling pressure on the Aussie could gather steam."

The US central bank's Federal Open Market Committee (FOMC) finishes it meeting tomorrow morning, Australian time, and is expected to delay the winding back of its economic stimulus program until next year because the US economy is weaker than previously thought.

"Traders are taking defensive action against the possibility that the Fed's statement will stress flexibility (in tapering), which may lead to less certainty," Mr Spooner said.

Meanwhile, bond futures prices were higher.

At 12pm AEDT today, the December 10-year bond futures contract was trading at 96.060 (implying a yield of 3.940 per cent), up from 96.055 (3.945 per cent) yesterday.

The December three-year bond futures contract was at 97.020 (2.980 per cent), up from 97.000 (3.000 per cent).

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