Yellen remarks drive dollar lower

Remarks in support of stimulus measures from the next likely chair of the US Federal Reserve have failed to help the Australian dollar.

Remarks in support of stimulus measures from the next likely chair of the US Federal Reserve have failed to help the Australian dollar.

Late on Friday, the dollar was trading at US93.36¢, down from Thursday's close of US93.52¢.

Janet Yellen, President Barack Obama's nominee for the Fed chair, told a US Senate committee that while stimulus measures "cannot continue forever", the central bank's policy would first support economic growth and jobs.

The Australian dollar recovered during the afternoon but still finished weaker, as Ms Yellen had released a statement the previous day expressing similar pro-stimulus sentiments.

"It surprised the market that it came out so early - you saw a bit of an impact then and there," Commonwealth Bank currency strategist Joseph Capurso said.

Ms Yellen's comments helped buoy equity markets on Friday, as investors were convinced the Fed would wait until next year before diluting its bond-buying program.

"The guessing game is all about when next year do they start to taper," Mr Capurso said. "Our view, for what it's worth, is they'll start in March." But her comments had little effect on the local bond market, which finished flat.

Nomura Australia head of global markets Jon Linton said this was because bond dealers had taken their cues from her earlier prepared remarks. "Her aim [at her Senate confirmation hearing] was to say nothing new. The written statement was out so she stuck with that and she played a very straight bat and did a professional job of a central banker, which is not saying anything."

During her appearance before the Senate banking committee, Ms Yellen said the US economic stimulus program "cannot continue forever", but boosting economic growth and lowering unemployment would remain priorities.

The December 10-year bond futures contract was trading at 95.850 (implying a yield of 4.150 per cent), unchanged from Thursday. The three-year contract was at 96.900 (3.100 per cent), up slightly from 96.890 (3.110 per cent).