Federal Reserve chairman Ben Bernanke has flagged that interest rates will remain low for a "considerable time" after quantitative easing ends, as the Reserve Bank of Australia's assistant governor said the US central bank held the key to a lower dollar here.
Dr Bernanke said on Wednesday that the Fed "remains committed to maintaining highly accommodative policies for as long as they are needed". The Fed would continue to monitor the progress made in the labour market since the start of the $US85-billion-a-month bond-buying program in September last year, and the "prospect for continued gains", he added.
"The target for the federal funds rate is likely to remain near zero for a considerable time after the asset purchases end, perhaps well after the unemployment threshold [of 6.5 per cent] is crossed and at least until the preponderance of the data supports the beginning of the removal of policy accommodation," Dr Bernanke said.
The Australian dollar initially jumped past US94¢ late on Tuesday on comments from China that the world's second-largest economy would intervene less frequently in the foreign exchange market.
Dr Bernanke's remarks pushed it to as high as US94.48¢, before easing slightly. It was buying US93.99¢ late on Wednesday.
Currency strategists said the sale of new 20-year Australian government securities, the final issue of the Treasury bond until April next year, also provided support for the local dollar.
Analysts added that while China was signalling a liberalisation of its exchange rate, any major reforms were still in the early stages.
The RBA's assistant governor for financial markets, Guy Debelle, said on Wednesday it would be a "desirable thing" to hear that the Fed had begun to taper as it meant the US economic outlook was strengthening. But until then, and as long as the Fed's bond-buying program remained unchanged, the dollar was likely to remain at a higher level, he said.
"As we've said on a number of occasions, we would prefer [the Australian dollar] to be lower, one major thing that would do that would be the day when [the US Fed] changes its monetary policy direction," he said. "The sooner that day comes the better, but that is not in our hands — it's in theirs."
Dr Debelle's comments continued the RBA's recent push to talk down the Australian dollar, which it believes needs to trade at lower levels to support the economy as it rebalances away from mining-led growth.
It also reflected the frustration faced by the world's central bankers as they readjust their monetary policies to accommodate quantitative easing by some countries.