Australia: The recent rally in the AUD continued overnight with the local unit breaching USD0.9700 to record its highest level since July 2008.

The Aussie has recorded gains of over 8% this month and nearly 15% since June 30.

Yesterday's release of manufacturing data out of China added to the bullish tone surrounding the AUD.

According to a purchasing managers index released by HSBC, Chinese manufacturing accelerated in September to reach the highest level in 5 months.

Given the focus of the markets on the Asian growth story, and the likely flow on effects for the Australian economy, any positive news out of China is spurring investors to buy the AUD.

The interest rate outlook is also adding to the strength of the AUD, with the majority of market economists now predicting the RBA will hike official interest rates at next week's RBA Board meeting to take the official cash rate to 4.75%.

Given official interest rates in the US, Japan and the UK sit at close to 0%, it is difficult for investors to find a more attractive place than Australia to invest their funds right now.

As long as this scenario remains in place, it is difficult to imagine the AUD having any big pullbacks.

Majors: The USD lost further ground against most of the other major currencies overnight on speculation the US Federal Reserve will need to resort to further easing measures in order to try and speed up the US economic recovery.

The jobless rate remains stubbornly high in the US while the housing market also shows little sign of improvement.

US Federal Reserve Chairman Ben Bernanke is due to testify at a Senate Banking Committee hearing tonight and markets will be paying close attention to any remarks he makes on how the Fed may move to help the US economy.

Currency moves continue to grab world headlines as the Bank of Japan tries to contain the rapidly appreciating JPY and the Brazilian Finance Minister warned of the possibility of a "currency war".

China is also under renewed pressure to allow the Yuan to appreciate at a faster pace.