The Australian dollar has rallied as the greenback continues to be pounded on reduced odds of a near-term US rate rise.

At 0700 AEST on Tuesday, the local unit was trading at 73.66 US cents, up from 73.35 cents on Monday.

Overnight, the head of the US Federal Reserve flagged concern with US labour market weakness, as well as China and Brexit risks, BK Asset Management managing director of FX strategy Kathy Lien says.

This caused investors to further dial back expectations for an interest-rate rise in the coming months.

“To be clear, Yellen still believes that economic positives outweigh the negatives,” she said.

“The Fed is still on track to raise interest rates in 2016, but at this stage a hike in June is definitely not happening and for rates to rise in July we would need to see payrolls rise by more than 200,000.”

The Reserve Bank of Australia makes its own rate call on Tuesday, and while Lien doesn’t expect back to back easing in June, she says the door to additional stimulus could remain wide open.

“Between the slowdown in China’s economy and the mixed readings in Australia, the RBA is expected to maintain a dovish bias,” she said.

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