The Australian dollar has backed away from its four month high as optimism about a resolution to the US budget crisis wanes.
At 0700 AEDT on Wednesday, the local unit was trading at 95.11 US cents, down from 95.33 cents on Tuesday.
The currency hit a four-month high of 95.40 US cents during local trade on Tuesday on expectations an agreement would be reached on raising the US government’s debt ceiling.
US political leaders have until October 17 to pass a bill raising the government’s borrowing limit, or risk a default.
OM Financial senior client adviser Stuart Ive said risk currencies and US stock markets fell in overnight trade after both chambers of the Congress failed to even vote on raising the debt ceiling.
“The lack of progress in the US on any settlement to their debt ceiling has really taken the edge off the markets and we’ve seen the Aussie dollar fall,” he said.
“Markets are very subdued at the moment. We’re just all waiting for some progress.”
Ive said investors would stay focused on any developments or progress in reaching a deal on the US government’s borrowing limit.
Meanwhile, Reserve Bank of Australia governor Glenn Stevens will give a speech in Sydney on Friday, which, Ive said, hopefully would give some guidance on the interest rate outlook.
AAP
