$A backs away from one-month high

AAP

The Australian dollar has drifted lower in morning trade after hitting a one-month high when new US Federal Reserve chief Janet Yellen said she would keep the Fed's policies in place.

At 1200 AEDT on Wednesday, the local unit was trading at 90.17 US cents, up from 90.03 cents on Tuesday.

In overnight trade, the currency rose as high as 90.48 US cents, its strongest level since January 14.

Dr Yellen told a Congressional committee that the Fed would continue to slowly reel in its large bond purchase program while keeping a close eye on the labour market, where recovery remains "far from complete".

ForexCT head of research Steven Dooley said traders started to sell the currency as it neared 90.50 US cents.

He said that weak consumer sentiment figures, released during the morning, added to the selling pressure on the Australian dollar.

"We got up to that level and drifted back," Mr Dooley said.

"I think there are still some people who are keen to sell the Aussie dollar."

Consumer confidence fell to its lowest level in seven months in February, according to the Westpac/Melbourne Institute index of consumer sentiment.

Mr Dooley said the Australian dollar's fall would be limited as investors would play it safe ahead of the release of official Australian employment figures for January.

"With Aussie jobs data out on Thursday morning there's not going to be as much selling interest in the Australian dollar as you'd normally find. I think most traders are going to sit on the sidelines and see what numbers we get," he said.

Meanwhile, the Australian bond market was weaker.

At 1200 AEDT on Wednesday, the March 2014 10-year bond futures contract was trading at 95.855 (implying a yield of 4.145 per cent), down from 95.875 (4.125 per cent) on Tuesday.

The March 2014 three-year bond futures contract was at 96.930 (3.070 per cent), level with its previous local close.