Mr Willliams in his speech further argued it would be more prudent for the US Federal Reserve "to take preventative measures than to wait for disaster to unfold".

Fed vice-chairman Richard Clarida then reinforced this message when he told a US television network that the central bank might have to act early and not wait "until things get so bad".

Citi now sees a 50bp cut by the Fed this month: a positive for the Australian dollar. Bloomberg

The Aussie dollar's rise this week may provide support for a continued rise to US71¢ next week, NAB's head of foreign exchange strategy Ray Attrill said.

"The view is that US70.5¢ was quite an important level, technically. It's been a level we bumped up against a few times in recent weeks without being able to break," Mr Attrill said.

Holding above this level on Friday would mean "technically that's a very positive signal for a move up to at least [US]71¢ in the near term," he said.

The currency had already received a boost on Thursday after the latest Australian labour force report showed full-time jobs supplanting part-time positions.

In a note citing both Mr Williams and Mr Clarida, Citigroup currency strategists said they were now betting on a half-percentage point rate cut by the US Fed when it meets on July 30-31.


The change in the Fed forecast "reinforces our tactically bearish [US] dollar view", a positive for the Australian dollar, the strategists said.

"Given a still-solid outlook for US growth, the Fed view will probably further intensify speculation that US authorities are intent on weakening the dollar or at least standing in the way of further US dollar strength, which could potentially raise pressure for further interest rate cuts down the line."

The Fed comments also increase the risk that the European Central Bank will cut rates at a policy meeting next week, Citi said.

With Reuters