Dollar weaker ahead of Bernanke speech

THE dollar closed weaker in local trading today as speculation eased that the US central bank will launch a third round of economic stimulus.

THE dollar closed weaker in local trading today as speculation eased that the US central bank will launch a third round of economic stimulus.

At 5pm the dollar was trading at 104.56 US cents, down from 104.80 cents yesterday.

Since 7am today, the local unit traded between 104.29 US cents and 104.76 cents.

Market sentiment this week has been driven by expectations that US Federal Reserve chairman Ben Bernanke will say a third round of economic stimulus, or quantitative easing (QE), will be needed to help the struggling American economy.

Dr Bernanke will address a symposium of global central bankers in Jackson Hole, Wyoming, tomorrow night, Australian time.

Westpac analysts said the Australian dollar had softened in another quiet day of trading ahead of the statement by Dr Bernanke.

After trading in a tight range earlier in local trading, the Australian dollar fell half a US cent to its morning low after a FT.com article raised fears about Chinese economic growth.

Commonwealth Bank currency strategist Joe Capurso said a slowing Chinese economy would be bad news for Australia's mining boom.

"It (the news article) was talking about the China-fuelled resources boom is at risk, so the Aussie dollar is the currency that is hardest hit by those sorts of stories," Mr Capurso said.

"It mainly reflects more worries about the world economy and that China is slowing down."

Reserve Bank of Australia (RBA) governor Glenn Stevens will appear before the House of Representatives Standing Committee on Economics tomorrow.

At 5pm the dollar was at 80.73 Japanese yen, up from Tuesday's close of 80.26 yen, and at 72.47 euro cents, down from 72.65 euro cents.

Meanwhile, the Australian bond market was weaker.

At 4.30pm, the September 10-year bond futures contract was trading at 95.565 (implying a yield of 4.435 per cent), down from 95.640 (4.360 per cent) yesterday.

The September three-year bond futures contract was at 96.170 (3.830 per cent), down from 96.290 (3.710 per cent).

The RBA's trade weighted index was at 75.0, down from 75.2 on Wednesday.