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$A higher on US equities rally

The Australian dollar opened firmer as a positive session on Wall Street gave a boost to commodity-driven currencies.

At 0700 AEST on Wednesday, the Australian dollar was trading at $US0.8275/80, up 0.79 per cent from Tuesday's close of $US0.8212/14.

Since 1700 AEST on Tuesday, the local unit traded between $US0.8125 and $US0.8280.

Wall Street ended higher with a late rally to reverse a two-day decline.

. Equity markets in the US had a choppy rebound although Federal Reserve Chairman Ben Bernanke set the tone for the day by saying late on Monday (mid-day Tuesday AEST) that he didn't expect the economy to have a "double dip" recession.

"My best guess is we will have a continued recovery, but it won't feel terrific," Dr Bernanke said after close of New York trade on Monday.

The Dow Jones industrial average closed up 1.26 per cent on Tuesday (0600 AEST Wednesday), while the broader-based Standard & Poor's 500 index ended 1.10 per cent higher.

Corporate dealer with online currency trader OzForex, Darren Richardson, said the Australian dollar followed the lift in market sentiment towards risk during Tuesday's offshore trade.

"Late in the US session, we saw equities spike 1.25 per cent," Mr Richardson said from Toronto.

"That provided a great increase in market confidence and that saw the Canadian dollar and the Aussie dollar spiking higher."

The Australian dollar is considered a gauge of risk sentiment on financial markets as the currency is linked to overall global growth.

Economic events due locally on Wednesday include housing finance commitments data for April from the Australian Bureau of Statistics and the Westpac/Melbourne Institute survey of consumer sentiment for June.

Also, Reserve Bank of Australia governor Glenn Stevens is to speak to the Western Sydney Business Connection in Castle Hill, Sydney.

Mr Richardson forecast the Australian dollar would trade between US$0.8225 and US$0.8350 on Wednesday, with comments from the RBA governor deemed positive on interest rates to lift the local currency.

"If he begins to be a bit more hawkish on interest rates, we will see the Aussie dollar spike higher and look to get to $US.8350," he said.

Join the CIO Australia group on LinkedIn. The group is open to CIOs, IT Directors, COOs, CTOs and senior IT managers.

More about: Australian Bureau of Statistics, Dow Jones, RBA, Reserve Bank of Australia, Wall Street, Westpac, Westpac

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