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SYDNEY - The Australian dollar closed at a two-week high after the US central bank chief said the US economy was likely to emerge from recession in late 2009, with his positive sentiment buoying appetite for risk-sensitive currencies.
At 1700 AEDT, the Australian dollar was trading at US$0.6511/14, up from Tuesday's close of US$0.6476/79.
This was the firmest local finish since February 13, when the Australian dollar closed at US$0.6577.
During the local session, the unit moved between an early low of US$0.6475 and a mid-morning high of US$0.6539.
The Australian dollar was on a firmer footing after US Federal Reserve Chairman Ben Bernanke told the US Senate banking committee, on Wednesday morning (AEDT), that the US economy was likely to emerge from recession in late 2009.
"In my view - there is a reasonable prospect that the current recession will end in 2009 and that 2010 will be a year of recovery," Dr Bernanke said in Washington.
Forecast senior currency analyst Lee Wai Tuck said Dr Bernanke's positive comments helped the Australian dollar as traders saw the possibility of a US recovery as a sign major banks may not have to be nationalised.
"He soothed the fears that the banks might be nationalised," Mr Lee said.
"In a sense, the positive mood in the US stock market has carried through in the Asian market. The Asian markets are beginning to recover as well."
Mr Lee said US President Barack Obama's address to a joint sitting of Congress, delivered on Wednesday afternoon, had added to the positive tone in the market.
"We will rebuild. We will recover, and the United States of America will emerge stronger than before," President Obama said.
Official Australian data released on Wednesday showed a bigger than expected 1.2 per cent rise in the labour price index during the December quarter.
Mr Lee said traders took the view future interest rates cuts may be smaller than previously thought.
"The Reserve Bank might be watching any inflation, so going ahead, the RBA might cut rates less aggressively ... In a sense that's positive for the Aussie," Mr Lee said.
The Australian dollar was expected to stay above US$0.6500 during offshore trade as Dr Bernanke addressed the US House of Representatives monetary policy committee.
Australian capital expenditure data for the December quarter is due out on Thursday, with economists expecting a slump of 3.3 per cent.
Mr Lee expected the data to show a less dire than expected fall of 2.8 per cent.
CURRENCY TABLE
CURRENCY SPOT PREVIOUS CLOSE
AUD/USD 0.6511-14 0.6476-79
AUD/JPY 63.26-33 61.72-76
AUD/EUR 0.5070-77 0.5081-89
AUD/NZD 1.2639-64 1.2618-32
AUD/GBP 0.4476-84 0.4443-52
EUR/USD 1.2836-38 1.2739-41
USD/JPY 97.16-19 95.30-33
EUR/JPY 124.74-77 121.41-46
(*Closes taken at 1700 AEDT Previous local session)
At 1600 AEDT, the Reserve Bank of Australia's trade weighted index was at 55.0, up from Tuesday's close of 54.4.
- AAP
