Aussie dollar bounces on broad-based greenback weakness

The Australian dollar bounced overnight as reaction to the cautious U.S. Federal Reserve's policy statement continues, giving potential for the unit to grind higher.

At the Asian open on Friday, the Australian dollar was trading at 76.46 U.S. cents, up from 75.97 U.S. cents at Thursday's close. At 0942, the unit had slipped slightly to 76.39 U.S. cents.

The Australian dollar is expected to grind higher to 78 U.S. cents in the near term before loosing momentum after reaching its highest level since July 2015 on broad-based U.S. dollar weakness overnight.

"Reaction to the FOMC's more cautious tone and downshift in its 2016 interest rate projects has continued to weigh on the U.S. dollar," Commonwealth Bank of Australia senior currency strategist Elias Haddad said.

U.S. dollar weakness helped boost key commodities overnight, supporting the local unit. However, a strong Aussie dollar could hurt the growing services and tourism sectors, but also the Reserve Bank of Australia's inflation forecasts, leading to expectations of a rate cut.

"The RBA emphasised that inflation is likely to be the main driver of any further rate cuts in their minutes released on Tuesday," IG market analyst Angus Nicholson said. Endit