The Australian dollar plunged more than US1c yesterday amid rising concerns the US central bank might soon take steps to start withdrawing stimulus measures that have supported the world's biggest economy since the global financial crisis.
Minutes from the Federal Reserve's January policy meeting revealed much discussion about when and how the central bank should start tapering its $US85 billion monthly bond purchases. At 5pm AEDT, the dollar was at $US1.0235, a fall of US1.3c.
"With the possibility of the asset purchases being wound down ahead of schedule, this has propped up the greenback across the board," said Tim Waterer, a currency strategist at CMC Markets.
But he said there was no reason to expect change at the Fed in the near term, and if the central bank acted too early, it could be a disaster for world economy.
"Whilst the minutes highlighted the risks of ongoing asset purchases, a scenario where the Fed pulls the reins in asset purchases too soon comes with significant risk also," he said.
