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AAP

2012-11-15

The Australian dollar has followed global share markets lower to finish the day down almost one US cent.

At 1700 AEDT on Thursday, the currency was trading at 103.58 US cents, down from 104.52 cents on Wednesday.

On Thursday morning it reached a two-week low of 103.48 US cents.

Ozforex head of corporate dealing Jim Vrondas said the currency moved lower overnight amid weaker US sentiment and continued to fall during Thursday morning.

"You could classify the day as one of two halves, we saw the decline continue early in morning trade but then we saw the Aussie bounce back closer to 104 (US cents) later in the day," he said.

Global sentiment has turned sharply negative over the past fortnight, partly due to concerns about the so called `fiscal cliff' of tax increases and spending cuts due to come into effect in the US in early 2013.

New York's Dow Jones Industrial Average dropped 1.45 per cent overnight on Wednesday, while London's FTSE lost 1.11 per cent and Frankfurt's DAX30 finished 0.94 per cent lower.

The negative sentiment continued into the local session with the ASX200 down 0.89 per cent.

Mr Vrondas said the key event for the currency overnight would be the release of European gross domestic product (GDP) data for the September quarter.

But he said the currency was likely to move lower and could drop below 103 US cents.

"My view is that we will probably break through that 103.50 (US cents) barrier and possibly test below 103."

At 1700 AEDT, the Australian dollar was at 83.81 Japanese yen, up from 83.12 yen on Wednesday, and at 81.27 euro cents, up from 82.16 euro cents.

Meanwhile, Australian bond futures prices finished the day higher.

ANZ head of interest rate research Tony Morriss said a string of international factors, including the falls on global share markets, added to demand for local bonds.

"Obviously the backdrop has been quite positive (for bonds) for a number of reasons," he said.

Mr Morriss said the local bond market opened higher on Thursday and continued to rally throughout the day.

He said global events were likely to drive the local bond market for the next few weeks.

"We haven't really (got) major data here until the capital expenditure data next week and the RBA (interest rates) decision in December," he said.

At 1630 AEDT on Thursday, the December 10-year bond futures contract was at 97.060 (implying a yield of 2.940 per cent), up from 97.015 (2.985 per cent) at Wednesday's close.

The December three-year bond futures contract was trading at 97.530 (2.470 per cent), up from 97.470 (2.530 per cent).

Evan Schwarten