The Australian dollar tumbled yesterday as after a hawkish tone form Fed president Janet Yellen and an unexpected cut in interest rates from the Canadian central bank.
The Aussie dollar closed out the day at US73.70c down from US74.50c at Tuesdays close.
Yellen noted that the US economy was on the rise including a strong mobs market, which will keep the US central bank on track to raise rates this year.
BK Asset Management managing director Kathy Lien noted that the bullish testimony buoyed investors and sent them pouring into the US dollar.
"Not only did Yellen confirm that rates will rise this year but it is her view that waiting too long would mean rates would have to rise at a faster pace later," she said. "She prefers to start earlier to allow for a more gradual rate path. As a result every FOMC meeting this year including September is a live meeting at which the central bank could raise rates." she said.
Also hitting the Australian dollar yesterday was the decision by the Royal bank of Canada to cut interest rates from 0.75% down to 0.5% in the wake of falling commodity prices.
The reduction had a knock on affect to the Aussie dollar, as the Australian economy is also heavily reliant on commodities such as Iron ore and copper with fears that the trouble may spread locally.