Dollar rallies against weaker greenback

THE dollar is comfortably above the 105 US cent mark after climbing more than 0.8 of a cent against a weaker greenback overnight.

THE Australian dollar is comfortably above the 105 US cent mark after climbing more than 0.8 of a cent against a weaker greenback overnight.

At 12.00 AEDT, the Australian dollar was trading at 105.29 US cents, up from 104.48 cents on Monday.

Easy Forex currency dealer Tony Darvall said the rally came after Federal Reserve chairman Ben Bernanke indicated the Fed would need to continue supporting the US economy, despite recent jobs growth.

Mr Darvall said markets had been concerned that recent signs the US economy is recovering, including a fall in the unemployment rate, could prompt the Federal Reserve to start tightening monetary policy.

"The market has been waiting for clarification - Is the Fed about to start tightening policy? - and we got the answer last night: No its not, and the US economy still needs support," Mr Darvall said.

"As a result the Aussie dollar had a good night overnight and we're back above 105 US cents, which has been a pretty key level for the Aussie over the last couple of months."

Dr Bernanke said in a speech that recent jobs growth was unlikely to continue without a significant improvement in consumer and business demand and the Fed would need to retain its existing policies for some time.

"We cannot yet be sure that the recent pace of improvement in the labour market will be sustained," Dr Bernanke said.

"Further significant improvements in the unemployment rate will likely require a more-rapid expansion of production and demand from consumers and businesses, a process that can be supported by continued
accommodative policies."

The comments also saw global stock markets rally, and Mr Darvall said the positive sentiment was likely to carry the Australian dollar through most of this week.

"Following from this it is likely that we are going to see further US dollar weakness and the comments are basically a green light for stock markets to rally.

"We're expecting to see the Aussie dollar reach 105.80-106 US cents in the next 24-48 hours.
Meanwhile, Australian bond future prices were firmer at noon.

At 12.00 AEDT on Tuesday, the June 10-year bond futures contract was trading at 95.755 (implying a yield of 4.245 per cent), down from 95.765 (4.235 per cent) on Monday afternoon.

The June three-year bond futures contract was at 96.300 (3.700 per cent) down from 96.330 (3.670 per cent).