Bell FX Currency Outlook: The Australian Dollar fell to a fresh three-year low, after US Federal Reserve policy-makers spoke of tapering in the July FOMC minutes, by suggesting "it might soon be time to slow somewhat the pace" of asset purchases.

Australia: The AUD fell to its lowest point since August 2010 and traded to as low as 0.8975. This morning, it has bounced back to 0.9083 which is higher than yesterday's levels. The threat for the AUD is more US related at the minute, in particular the FOMC, as opposed to local scenarios.

It truly does appear there isn't much disagreement among the members that tapering needed to start, and what remains unclear is more the timing of the wind-down.

The timing of the Fed's plan to taper its stimulus program remains unclear, as others in the group "emphasised the importance of being patient" when stating more data measuring economic growth was required before reducing the $US85 billion-a-month bond-buying program.

More and more, the markets are feeling tapering is going to happen over the next few months, which will most likely cause appreciation in the USD.

Locally, with the AUD very much caught up in all the commotion, there is very little scheduled for Australian data until next week until the Q2 pre-GDP fixed investment partials of Construction Work Done (for residential, non-residential building and engineering construction) on Wednesday and then the New Private Capital Expenditure Survey for 2012-13 and 2013-14.

On Thursday, for the AUD market, the main focus data-wise this morning is the first estimate of HSBC's August Chinese PMI Manufacturing.

It was the July release showing it fell further that fuelled concerns the Chinese economy may have been further slowing into July. Subsequent partials, especially exports and industrial production, printed the other way (!) and so it's not surprising that the market expects this month to see something that is not as onerous. Support remains at 0.8920 then 0.8850.

Majors: As written, a stronger USD dominated, pretty much across the board, with GBP the exception as it held its ground better than the other majors.

Emerging market / commodity currencies felt the pain harder including the NOK, NZD, ZAR, MXN and BRL. The NZD was a standout underperformer, possibly reflecting the ongoing fall-out from the introduction of tight macro-prudential policy measures earlier this week.

USD/JPY was stronger, but only marginally so as investors anticipated possible weakness in Asian stocks today, which provided the JPY with mild safe-haven support. Markets in Asia have been particularly sensitive in recent days to the prospect of cheap USD finance coming to an end.

Tonight, there are the preliminary Euro-zone PMIs for August, the US has weekly jobless claims, June house prices and Kansas City Fed manufacturing, while Dallas Fed Governor Fisher (NVM) is speaking.
Economic Calendar
22 AUG AU Confidence Board Leading Index Jun
CH HSBC/Markit Flash Mfg PMI Aug
US Kansas City Fed Jackson Hole Economic Summit

For latest pricing, ranges, visit bellpotter.com.au