The Australian dollar has rebounded to take some of the ground lost against its US counterpart since the new Federal Reserve chairman Jerome Powell signalled there could be more US interest rate rises than was originally anticipated by markets.

At 0635 AEDT on Friday, the Australian dollar was worth 77.42 US cents, up from 77.25 US cents on Thursday.

The local currency has retraced some of the lost ground as the US dollar’s recovery off three-year lows stalled following Mr Powell’s second testimony to Congress, Westpac analysts say.

‘The USD index is unchanged, after earlier making a fresh six-week high,’ they said in a Friday morning note.

‘(The) AUD initially fell to a two-month low of 0.7713, then bounced to 0.7760.’

Mr Powell repeated his key themes from his testimony to the House of Representatives, namely that the central bank was keen on a gradual process of rate rises, but the Q and A session provided greater clues to the Fed chair’s thinking.

‘The Q&A session revealed a more even handed assessment of wage and inflation risks compared to Tuesday’s testimony, Powell saying that he sees no strong evidence of a decisive move up in wages and that more strengthening of the labour market can occur without stoking inflation,’ the analysts said.

‘Also of interest was US president Donald Trump’s meeting with steel and aluminium industry leaders in which he previewed plans to formally announce a 25 per cent tariff on imported steel and a 10 per cent tariff on aluminium.’

A lift in the price of iron ore would have also helped the local currency.

With no major risk events on Friday’s horizon for the Australian dollar, Westpac analysts says the currency ‘retains downside risks, given the USD’s recent recovery, targeting the 0.7650-0.7700 area next’.

The Aussie dollar has continued its slide against the yen and is slightly lower against the euro.


One Australian dollar buys:

* 77.42 US cents, from 77.25 on Thursday

* 82.37 Japanese yen, from 82.54 yen

* 63.31 euro cents, from 63.38 euro cents

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