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The Australian dollar went on a wild ride overnight

David Scutt

The Australian dollar went on a wild ride overnight, rallying hard initially before giving back most of its earlier session gains following the release of the US Federal Reserve's September interest rate decision.

Here's the scoreboard as at 8.10am AEST.

AUD/USD 0.8032 , 0.0001 , 0.01%
AUD/JPY 90.18 , 0.06 , 0.07%
AUD/CNH 5.2877 , -0.0006 , -0.01%
AUD/EUR 0.6752 , 0 , 0.00%
AUD/GBP 0.5947 , -0.0004 , -0.07%
AUD/NZD 1.0917 , 0.0004 , 0.04%
AUD/CAD 0.9896 , 0.0005 , 0.05%

And here's the AUD/USD 5-minute chart showing the roller coaster ride seen overnight.

After rallying hard before the release of the Fed's monetary policy statement and updated economic projections, the Aussie plunged from 81 cents to as low as .7984 before eventually recovering into the New York close.

The gyrations in the Aussie reflected the upbeat tone of the Fed's economic projections, including the news that FOMC members still expect to hike rates four times by the end of next year, unchanged from the view presented three months ago.

The Fed also upgraded its view on GDP growth and unemployment, offsetting a small downward revision to its inflation forecasts.

It also announced that it will begin its balances sheet normalisation from October, initially allowing $10 billion worth of maturing treasuries and mortgage-backed securities to run-off every month.

"The September FOMC outcome has gone pretty much to script with a broadly unchanged post meeting statement, unchanged median ‘dots’ for both this year and next and confirmation that Fed balance sheet reduction will commence in October and at the pace previously indicated," said Ray Attrill, head of FX strategy at the National Australia Bank.

While there were few surprises from the FOMC statement and economic projections, the lack of near-term movement in individual FOMC forecasts on the outlook for the Fed funds rates helped to boost US treasury yields, sparking a relief rally in the US dollar as a result.

That weighed on the Aussie as a result, helping to explain the big move seen shortly after 4am AEST.

After being dominated by the US Fed on Wednesday, movements in the Aussie today will continue to be dictated by central bank's today.

At 3.10pm AEST, RBA governor Philip Lowe will deliver a speech entitled "The Next Chapter", an ominous-sounding speech, especially in relation to the outlook for Australian interest rates.

"The risk is Lowe talks up the economy and hints that the risk of a rate hike is growing," said Elias Haddad, senior currency strategist at the Commonwealth Bank.

Before that event arrives, the Bank of Japan will also announce its September monetary decision (it could arrive at any time from 1pm AEST onwards). While New Zealand Q2 GDP will also be released at 8.45am AEST -- an increase of 0.8% is expected.

Later in the session, ECB governor Mario Draghi is expected to speak while on the data front jobless claims, house prices, leading index and Philadelphia Fed manufacturing index will be released in the US.