Aussie dollar hits near nine-month high

The Australian dollar reached a near nine-month high overnight, popping above 77 U.S. cents as the U.S. Federal Reserve's cautious stance to policy normalization continues to weigh the greenback.

At the Asian open on Thursday, the Australian dollar was trading at 76.69 U.S. cents, up from 76.42 U.S. cents at Wednesday' s close.

The unit however hit an intra-session high of 77.10 U.S. cents in offshore trade, it's highest level since 1 July 2015.

The greenback remained under pressure overnight as markets continued to ignore U.S. economic data released overnight in favour of U.S.

Federal Reserve chair Janet Yellen's dovish speech two days ago. The ADP showed private employment expanded by 200, 000 jobs, which suggests March non-farm payrolls -- released on Friday AEDT -- will be strong.

"As long as the Federal Reserve keeps talking down the U.S. dollar, the Aussie is likely to continue at record highs," IG market analyst Angus Nicholson noted on Thursday. Adding to the unit's support, commodity prices are in the process of bottoming out, meaning Australia's terms of trade will stabilise, Commonwealth Bank of Australia currency strategist and international economist Joseph Capurso said.

"In addition, Australian interest rates remain high on a global comparison (2 percent) while current accounts should shrink with an eventual recovery in commodity prices," Capurso said.

However, the growing evidence of inflation"coming back", evidenced by the strong buying in Treasury Inflation Protected Securities (TIPS), may cause the U.S. Federal Reserve to dial back their dovishness, Nicholson said. "That will likely bring the lofty Australian dollar back down to earth," Nicholson said.

That's unlikely in the short term however as a mix of low U.S. consumer inflation expectations and a "statistical quirk" in earnings data -- watched closely by participants than payrolls as slack in U.S. labour market fades -- suggest it may be weaker than consensus, Capurso said.

"If this risk becomes reality, the U.S. dollar will remain heavy," Capurso said. By 0951 local time (AEDT), the Australian dollar was trading at 76.65 U.S. cents.