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$A falls on US interest rate uncertainty

Negative reaction to the US central bank's uncertain interest rate outlook has driven the Australian dollar lower.

At 1700 AEST on Monday, the local unit was trading at 71.76 US cents, down from 72.28 cents on Friday.

The Australian dollar initially rallied on the US Federal Reserve's decision to keep its benchmark interest rate on hold on Friday night.

But the Federal Reserve's concerns about global growth and uncertainty about whether it will raise its benchmark interest rate later this year are now weighing on market sentiment, Easy Forex currency dealer Andreas Tjahja said.

"The market is still digesting the US Fed's decision," he said.

"The uncertainty about when they will hike rates is pushing the Aussie down."

Fed chair Janet Yellen citied worries about the slowdown in China as the reason why there wasn't a rate rise last week, and the decision left investors uncertain of the outlook for the US economy.

Mr Tjahja said traders were also waiting for key Chinese manufacturing numbers, China's flash Caixin purchasing managers' index for September, due on Wednesday.

At 1700 AEST, the Australian dollar was at 86.06 Japanese yen, down from Friday's close of 86.47 yen and at 63.48 euro cents, up from 63.38 euro cents.

Meanwhile, the Australian bond market has finished firmer.

RBC Capital Markets fixed income strategist Michael Turner said the local share market and Asian equity markets have fallen sharply on Monday due to the uncertainty around global growth and US interest rates.

"Meanwhile, fixed income assets are being well supported," he said.

At 1630 AEST on Monday, the December 2015 10-year bond futures contract was trading at 97.245 (implying a yield of 2.755 per cent), up from 97.190 (2.810 per cent) on Friday.

The December 2015 three-year bond futures contract was at 98.110 (1.890 per cent), up from 98.100 (1.900 per cent).