The Australian dollar trimmed some of its impressive gains on Friday but managed to hold above 90 US cents, buoyed by the likelihood interest rates at home will rise faster than elsewhere. The US dollar earned a reprieve after Federal Reserve chairman Ben Bernanke indicated that monetary policy might have to be tightened there as a recovery takes hold.
The comments were not new, but investors used them as an excuse to trim long positions in the Australian dollar and the yen. By evening, the Aussie was at $0.9035, off a 14-month high of $0.9092 but still up more than 3 percent during the week. On the yen, the Aussie held above 80 yen, trading at 80.60 yen, up from 79.56 yen late on Thursday.
"Bernanke's comments may have sparked some profit-taking but the solid undertone for the Aussie remains intact and any dip is a buying opportunity," said Jim Vrondas, manager of corporate business at OzForex. "As long as US rates are low, we could see it turn into the preferred currency for carry trades and its downward trend will continue."