The Australian dollar has slipped against a strengthening US dollar which rose overnight alongside climbing US interest rates and as risk aversion appeared to fade.

At 0630 AEST on Wednesday, the Australian dollar was worth 78.85 US cents, down from 79.31 US cents on Tuesday.

Westpac’s Imre Speizer said the rise in the US dollar and US interest rates came ahead of Federal Reserve chair Janet Yellen’s speech and was driven by a risk-adverse stance following tension around North Korea’s comments to the US.

“With that risk aversion fading, equities also had a reasonably good night as well,” Speizer said on Wednesday.

In her speech, Fed chair Yellen said moving too gradually through rate hikes would be a problem for financial stability and that it is imprudent to keep the policy on hold until inflation reaches the two per cent mark.

Speizer said she spent more time discussing downside risks to inflation, which left markets confused.

“It left markets with a mixed tone overall and yields retreated about two basis points straight after her speech,” Speizer said.

He said locally, there wasn’t much that could sway markets on Wednesday.

But, investors will be looking out for US data on durable goods and fed speeches from US Federal Reserve governor Lael Brainard on labour market disparities and St. Louis Fed President James Bullard on the economy and policy.

The local currency fell to a six week low overnight and is trading lower against the euro but higher against the yen.

AAP

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