The Australian dollar clawed its way to a 26 month high on Wednesday night (AEST) before pulling back to open the domestic session flat, as investors weigh the odds of further stimulus measures in the US.

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The local currency pushed up to 96 US cents during offshore trade, its highest since it touched 97.92 US cents on July 25 2008.

But by Thursday’s 0700 AEST domestic open, the “Aussie” retreated to 95.68 US cents, up fractionally from Wednesday’s local close of 95.64 cents.

Since 1700 AEST on Wednesday, the currency traded between 96 cents and 95.09 cents.

Bank of New Zealand currency strategist Mike Jones said the Aussie had been moving higher since the US Federal Reserve said on Tuesday night it stood ready to “provide additional accommodation” to the US economy.

“The main focus for markets is still on (whether) the Fed will (initiate) more quantitative easing,” Mr Jones said.

Quantitative easing would involve the Fed buying US treasuries to increase the supply of money in the economy, a device used by the US central bank during the thick of the global financial crisis.

On Tuesday night (AEST), the Fed used much same language it did in August to sketch a downbeat view of the economy and concluded that US economic activity had slowed in recent months.

Since the statement, the US dollar slid to hit a six month low against a basket of currencies, while commodity prices soared as US gold futures for December finished the offshore session 1.5 per cent higher at $US1,292.10 per ounce.

The Aussie usually moves higher in line with commodity prices.

US shares closed lower, depressing the Aussie’s rise, Mr Jones said.

The Dow fell 0.2 per cent to 10,739.31 points as investors poured their money into gold or US treasuries.

The Standard & Poor’s 500 index slid 0.5 per cent to 1,134.28 points.

The Fed’s statement stands in direct contrast to the Reserve Bank of Australia’s (RBA) recent comments about the health of the domestic economy and prospects for an interest rate rise soon.

“It is a bit of an even chance now that the RBA will raise rates in October,” Mr Jones said.

He said there was potential over the next two weeks for the Aussie to move as high as 97 US cents.