Aust dollar takes hit on China

AAP, with a staff reporter

The Australian dollar fell in late trade after China's finance minister Lou Jiwei said the world's second biggest economy would be unlikely to receive a massive stimulus this year.

At 1700 AEST on Thursday, the local unit was buying 91.52 US cents, down from Wednesday's 92.08 cents.

The currency fell below 92 US cents during late morning trade and kept dropping, after a statement was posted on the Chinese finance ministry website quoting Mr Lou as saying "large-scale fiscal stimulus" measures won't be used this year.

CMC Markets foreign exchange dealer Tim Waterer said the news reawakened fears of a slowdown in Australia's main trading partner.

"The Australian dollar's certainly very hypersensitive to any news coming out of China," he said.

"We can't seem to go more than a few days without focus being brought back to an apparent slowing of the growth rate in China, and traders thinking about what implications that may have for resources."

The Australian dollar had earlier rallied after US Federal Reserve chairman Ben Bernanke said an unwinding of economic stimulus was not on a "preset course", with quantitative easing set to remain as unemployment stays high.

But the US dollar gained strength against the local currency and the euro during the afternoon, as traders revisited Dr Bernanke's comments.

"The market perhaps was expecting Bernanke to take a more dovish tone than what he actually did and that has seen some broad US dollar strength during Asian trading hours today," Mr Waterer said.

The Australian dollar also took a hit after a National Australia Bank survey showed business confidence fell into negative territory during the June quarter, amid fears of a China slowdown.