$A slumps nearly half a cent against $US

Chris Hutchings
(Australian Associated Press)

The Australian dollar is nearly half a per cent lower against its US counterpart after new Federal Reserve chair Jerome Powell’s congressional testimony sends the greenback higher.

At 0635 AEDT on Wednesday, the Australian dollar was worth 78.02 US cents, down from 78.48 US cents on Tuesday.

The US dollar added to gains against a basket of major currencies after the Fed boss told US lawmakers the central bank would stick with gradual interest rate increases despite the added stimulus of tax cuts and government spending.

Westpac’s Imre Speizer says the testimony caused ripples across markets.

“US bond yields and the USD rose, while equities and commodities fell. Powell repeated the gradualism mantra, as was widely expected, but noted improvements in the economy,” he said in a Wednesday morning note.

“The USD index is 0.5 per cent higher on the day, outperforming all the majors.”

Mr Speizer said the only real domestic event risks for the local currency on Wednesday is January’s private sector credit data.

“(It’s) expected to rise 0.4 per cent – a modest pace as housing slows. Business credit growth is volatile but is on a modest upward trend.”

He saw the Australian dollar “threatening to break below 0.7800, (but that) probably needs the recent USD rise to be sustained to do so”.

The Aussie dollar is slightly lower against the euro and down against the yen,

CURRENCY SNAPSHOT AT 0635 AEDT ON WEDNESDAY

One Australian dollar buys:

* 78.02 US cents, from 78.48 on Tuesday

* 83.78 Japanese yen, from 83.87 yen

* 63.74 euro cents, from 63.67 euro cents

(*Currency closes taken at 1700 AEDT previous local session)

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