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Dollar stays below 89

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The Australian dollar is slightly higher as the currency consolidates following its losses made after the US Federal Reserve meeting.

Early Friday, the local unit was trading at 88.56 US cents, up from 88.47 cents on Thursday.

Early on Thursday morning, the Australian dollar dropped as low as 88.22 US cents – its weakest level since August 2010 – after the Fed announced it would reduce its bond purchases by $US10 billion a month, to $US75 billion, from January.

OM Financial senior client adviser Stuart Ive said the Australian dollar had traded in a tight range overnight.

“It’s had a bit of a quiet night after all the fun and games of yesterday,” he said.

“I think everyone is just getting ready for Christmas. We’ve had the big news yesterday. We’re going to see some fairly subdued trading.”

Economic data overnight showed that claims for US unemployment benefits rose for the second consecutive week last week, hitting a nine-month high.

Ive said the jobs figures and some weak home sales data would have helped prevent the Australian dollar from falling further.

“I think that the market is going to be a little bit cautious. The Fed made it very clear that they’re going to be focusing on further data and if the data out overnight shows anything then that data can be mediocre at the best of times.”

Ive said the Australian dollar was getting support around 88.40 US cents, but if it does fall significantly below that level then the Aussie could break as low as 87.70 US cents.

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