Dollar up after prediction on stimulus

'There were market rumours that the Fed wasn't going to taper quantitative easing.' Milica Nikolic, Easy Forex

The Australian dollar was trading higher after an influential journalist on Wall Street said the US Federal Reserve was likely to keep its economic stimulus program in place at its next meeting.

Late on Friday, the dollar was trading at US92.54¢, up from US91.62¢ on Thursday.

The US dollar weakened overnight after reporter Jon Hilsenrath, of The Wall Street Journal, said the Fed was unlikely to begin winding back its stimulus program at its policy meeting next week.

The US central bank's Federal Open Market Committee will meet next week to discuss its monetary policies.

Though few expect any changes to its easy money policies, the market may be relatively quiet until the meeting, given general uncertainty over Fed policies.

"The US dollar took a bit of a bashing overnight because there were market rumours that the Fed wasn't going to taper quantitative easing," said Easy Forex currency dealer Milica Nikolic. "This sent the US dollar weaker."

Disappointing US durable goods orders also put pressure on the greenback. Orders for big-ticket US manufactured goods rose 4.2 per cent in June, higher than expected, but the increase was driven by transportation equipment orders, a volatile item.

Bond futures prices are flat after the US durable goods orders data.

Westpac market strategist Damien McColough said bond futures were affected by the figures, but only marginally.

"This is really just a consolidation day," he said.

The September 10-year bond futures contract was trading at 96.210 (implying a yield of 3.79 per cent), down from 96.215 (3.785) on Thursday. The three-year contract was at 97.290 (2.710 per cent), unchanged.

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