The Australian dollar has fallen and is buying 72.13 US cents, down from 72.44 US cents on Friday.
Last Friday, the local currency has fallen from multi-week highs against its US counterpart after the Federal Reserve underlined the diverging monetary policies between the antipodean nation and the United States.
The Australian dollar was last at 72.46 US cents, easing from as high as 73.03 US cents touched on Thursday – a level not seen since late September.
During the week so far, the Aussie has risen 0.7 per cent for its second consecutive weekly gain after upbeat economic data from China, Australia’s number one trading partner.
Yet the rally was stopped by a resurgent dollar after the Fed signalled it was sticking to its tightening path with a more than 75 per cent chance of a December rate hike priced in by the market.
On the flip side, the Reserve Bank of Australia has signalled it will keep rates on hold at a record low 1.50 per cent for a long time to come.
On Friday, the RBA upgraded its growth forecasts for the next couple of years and also sounded upbeat about the labour market.
However, it still does not see a “strong case” for a near-term rate rise as inflation is expected to remain tepid.
The RBA statement “just reinforced the fact that a lot of things still have to happen…before the RBA would even think about acting on its tightening bias,” said Ray Attrill, Sydney-based head of forex strategy, at the National Australia Bank.
“US interest rate volatility is going to be an important driver between Australian and US interest rates for the time being.”
Australian markets are also looking to the release of the all-important unemployment and quarterly wage figures due next week.
The RBA is awaiting a pick up in wage growth in the hope that it will help boost consumer spending and lift inflation to within its target band.
Australian government bond futures fell, with the three-year bond contract and the 10-year contract each down one tick at 97.805 and 97.220 respectively.
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