Aust dollar lifts sharply

Local currency bounces as Summers bows out of race to succeed Bernanke.

The Australian dollar has bounced on the news that former United States treasury secretary Larry Summers has withdrawn from the race to succeed Ben Bernanke as Federal Reserve chief.

At 0700 AEST, the local unit was trading at 93.32 US cents, up close to a dollar from 92.38 on Friday.

The Australian dollar rallied on Monday morning as US President Barack Obama confirmed he had accepted Mr Summers' decision to withdraw his candidacy to become the next Fed chairman.

Mr Summers had been the leading candidate to replace Dr Bernanke but faced opposition from some Democrats.

His withdrawal means the Fed will be less likely to wind back its economic stimulus program quickly, which is bad news for the US dollar and good news for the Australian dollar, said ANZ senior manager FX in Auckland Sam Tuck.

"Mr Summers was considered to be the more hawkish of the two potential candidates that we know about. The other candidate being Janet Yellen, who stands much more for status quo and a slowed exit from monetary policy stimulus," Mr Tuck said.

"As the US data continued to improve, Mr Summers would be considered to be much more likely to remove the stimulus quicker.

"The fact that he has pulled out would suggest we are less likely to have a quick exit from monetary policy stimulus in the US."

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