Dollar edgy on stimulus uncertainty

The Australian dollar finished the day higher, despite falling back from earlier highs amid uncertainty about the future of the US Federal Reserve's stimulus program.

The Australian dollar finished the day higher, despite falling back from earlier highs amid uncertainty about the future of the US Federal Reserve's stimulus program.

The currency rose as high as US97.50¢ early on Friday, up sharply from US96.23¢ on Thursday afternoon.

But it fell back during the morning and by the end of the local session was at US96.79¢.

LTG Goldrock director Andrew Barnett said the market was still reacting to Fed chairman Ben Bernanke's testimony to Congress, which raised expectations the central bank could start to wind back its asset buying program.

In his testimony Dr Bernanke warned of the dangers of stopping the Fed's stimulus program too soon, but later indicated the central bank could start to wind it back in the next few months.

"The market has just exhausted itself after Wednesday and Thursday," Mr Barnett said. "I think there are some traders who are just taking the pulse as to what's going to happen next."

Mr Barnett said the dollar would continue to face downward pressure.

Meanwhile, bond futures prices were lower as traders weigh falls on equity markets against the possibility the Federal Reserve will halt its stimulus program.

UBS interest rate strategist Matthew Johnson said: "The market probably wants to rally because equities are falling but there's this uncertainty about what the Fed is going to do."

He said a big focus for bond markets overnight would be the release of durable goods data in the US.

Late on Friday, the June 10-year bond futures contract was trading at 96.690 (implying a yield of 3.310 per cent), down from 96.705 (3.295 per cent) on Thursday.

The three-year contract was at 97.400 (2.600 per cent), down from 97.410 (2.590 per cent).

AAP

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