The Australian dollar has rallied to an almost one-month high after US Federal Reserve head Janet Yellen said she would maintain policy set under her predecessor, Ben Bernanke.
At 0700 AEDT on Wednesday, the local unit was trading at 90.37 US cents, up from 90.03 cents on Tuesday.
In overnight trade, the currency rose as high as 90.48 US cents, its strongest level since January 14.
Dr Yellen told a Congressional committee that the Fed would continue to slowly reel in its large bond purchase program while keeping a close eye on the labour market, where recovery remains “far from complete”.
Westpac New Zealand senior market strategist Imre Speizer said Dr Yellen’s comment reassured markets and helped boost optimism.
“Her statement and ensuing comments demonstrated continuity of policy, perhaps offering relief to equity markets,” he said.
“Janet Yellen’s prepared testimony was similar in tone to the January 29 FOMC (Federal Open Market Committee) statement.
“She was asked what it would take to pause the taper; she replied a material change in the outlook for the labour market.”
Mr Speizer said he expects the Australian dollar to keep gaining ground over the next few weeks, thanks to the Fed’s steady policy course and the Reserve Bank of Australia’s stance of keeping the cash rate unchanged.
He said the Aussie dollar could rise to 91 US cents.
Of interest to local markets on Wednesday will be the release of the Westpac/Melbourne Institute Survey of consumer sentiment.
AAP
