The Australian dollar dropped on Friday after investors sold out of the currency in response to reports suggesting Chinese authorities would slow lending among the country's banks.
But the local currency staged a strong rebound late in the session after European markets opened to finish just shy of $US0.8300.
At the local close, the dollar was trading at $US0.8295, down from Thursday's close of $US0.8310.
The Australian dollar started the local trading day above $US0.8300, but drifted lower in afternoon trade after it was reported the China Banking Regulatory Commission would tighten capital requirements on the nation's banks.
"That was seen as quite negative for Chinese economic growth and as a result we did see the Aussie come under a fair bit of downward pressure from that,'' ANZ Banking Group senior economist Katie Dean said.
After reaching the intraday low of $US0.8218, the Australian currency staged a late afternoon rally to end the local session just before of $US0.8300.
"Part of that is that there is very strong demand for our currency on dips at the moment,'' Ms Dean said. "We haven't seen those sorts of levels around $0.8220 for a few days, so that was seen as a good time to go in and do some opportunistic buying.''
Ms Dean said the prospect of interest rate rises from the Reserve Bank of Australia (RBA) helped push the Australian dollar into its current trading range between $US0.8100 and $US0.8400, from its previous trading range of $US0.7700 and $US0.8100.
"That coincided with a change in interest rate expectations, but we haven't really seen interest rate expectations move at all this week,'' Ms Dean said.
US economic data due out during Friday night's offshore session included existing home sales figures for July.
Also, US Federal Reserve chairman Ben Bernanke was due to speak at the Kansas City Federal Reserve's annual Jackson Hole conference.Ms Dean said she expected equity markets to provide the bulk of direction for currency markets during the offshore session.
READ MORE
But the local currency staged a strong rebound late in the session after European markets opened to finish just shy of $US0.8300.
At the local close, the dollar was trading at $US0.8295, down from Thursday's close of $US0.8310.
The Australian dollar started the local trading day above $US0.8300, but drifted lower in afternoon trade after it was reported the China Banking Regulatory Commission would tighten capital requirements on the nation's banks.
"That was seen as quite negative for Chinese economic growth and as a result we did see the Aussie come under a fair bit of downward pressure from that,'' ANZ Banking Group senior economist Katie Dean said.
After reaching the intraday low of $US0.8218, the Australian currency staged a late afternoon rally to end the local session just before of $US0.8300.
"Part of that is that there is very strong demand for our currency on dips at the moment,'' Ms Dean said. "We haven't seen those sorts of levels around $0.8220 for a few days, so that was seen as a good time to go in and do some opportunistic buying.''
Ms Dean said the prospect of interest rate rises from the Reserve Bank of Australia (RBA) helped push the Australian dollar into its current trading range between $US0.8100 and $US0.8400, from its previous trading range of $US0.7700 and $US0.8100.
"That coincided with a change in interest rate expectations, but we haven't really seen interest rate expectations move at all this week,'' Ms Dean said.
US economic data due out during Friday night's offshore session included existing home sales figures for July.
Also, US Federal Reserve chairman Ben Bernanke was due to speak at the Kansas City Federal Reserve's annual Jackson Hole conference.Ms Dean said she expected equity markets to provide the bulk of direction for currency markets during the offshore session.
