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The Australian dollar has crept a little higher against its US counterpart the day after global equity markets plunged amid widespread sell-offs that wiped out $US4 trillion in value – $66 billion of it off Australian shares.

At 0635 AEDT on Wednesday, the Australian dollar was worth 78.78 US cents, up from 78.57 US cents on Tuesday.

The local currency has clawed back a little lost ground despite the greenback strengthening.

The US dollar index climbed for a third straight session from a three-year low on buying from traders closing out bearish bets against the dollar versus the euro, sterling and riskier, commodity-linked currencies.

‘The dollar is shrugging off expectations of fewer Fed (US Federal Reserve) rate hikes,’ Reuters quoted Joe Manimbo, senior market analyst at Western Union Business Solutions in Washington, as saying.

‘It’s enjoying a short-covering and a broader safe-haven bid instead.’

Currencies at risk during a global equity slump are higher-yielding commodity-linked currencies like the Australian dollar and emerging market currencies, which often slide when risk appetite drops, analysts told Reuters.

At 10.23 am (0223 Wednesday AEDT), the dollar index was up 0.48 per cent at 89.984, but later turned flat.

The original trigger for the massive equities sell-off was a sharp rise in US bond yields late last week after data showed US wages increasing at the fastest pace since 2009. That raised the alarm about higher inflation and, with it, potentially higher interest rates.

The Aussie dollar was also higher against the yen and the euro at 0635 Wednesday AEDT.


One Australian dollar buys:

* 78.78 US cents, from 78.57 on Tuesday

* 86.08 Japanese yen, from 85.55 yen

* 63.59 euro cents, from 63.49 euro cents

(*Currency closes taken at 1700 AEDT previous local session)