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It's going to be a waiting game for the Australian dollar today

Peter Macdiarmid/Getty Images

On the back of weakness in commodities, underwhelming US economic data and profit-taking before tomorrow’s US rate decision, the Australian dollar continued to drift lower overnight, hitting a low of .7445 before bouncing modestly into the New York close.

At 8am AEDT, the AUD/USD was buying .7453, down 0.75% from Tuesday’s closing level. It has now lost close to 2% over the past two trading sessions.

With no major data releases arriving in Asia on Wednesday, today’s session looks set to be a waiting game before tomorrow’s all-important US Federal Reserve policy decision.

“The Fed’s pronouncements in the early hours of our Thursday morning (5am AEDT) promises to make for quiet markets ahead of the event,” said Ray Attrill, global co-head of FX strategy at the NAB in his morning note.

“That said, the latest US inflation read-out, courtesy of February CPI, has potential to create some volatility. Core (ex food and energy) CPI rose further above 2% in January (2.2% from 2.1%) and is expected to hold there. If US rates do trade higher (or even just steady) out of the Fed (or CPI) then this has potential to lift the US dollar and take a little more of the steam out of the AUD.”

While there may be some short-term volatility accompanying the CPI release at 11.30am AEDT this evening, most attention will be directed on the US rate decision in the early hours Thursday morning.

Though no one expects a rate hike, the tone of the accompanying policy statement, updated economic forecasts, the Fed’s “dot plot” and chair Janet Yellen’s press conference will scrutinised closely to see just how close the bank is to following up its December 2015 rate hike with another.

Here’s the full Aussie dollar scoreboard.

  • AUD/USD 0.7453 , -0.0003 , -0.04%
  • AUD/JPY 84.32 , -0.06 , -0.07%
  • AUD/CNH 4.8500 , -0.0047 , -0.10%
  • AUD/EUR 0.6706 , -0.0005 , -0.07%
  • AUD/GBP 0.5266 , -0.0001 , -0.02%
  • AUD/NZD 1.1275 , -0.0013 , -0.12%

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