The Australian dollar edged off lows on Tuesday, aided by a softer US dollar, as investors revived bets of US interest rates staying at zero for some time. At the local close, the dollar was trading at $US0.9127, from a low of $US0.9054 struck offshore, to be marginally down from $US0.9155 seen here at yesterday’s close.

After a brief respite last week, the beleagured US dollar swung lower on Tuesday as investors took to heart remarks from Federal Reserve Chairman Ben Bernanke that US rates will stay low for an "extended period".

In case markets had not got the message, NY Fed Chief William Dudley repeated that economic circumstances underpinned the central bank's pledge to keep rates low for a long time. "It's an extended reaction in Asian trade to Bernanke's comments," said Richard Grace, a currency strategist at Commonwealth Bank. "It's a US dollar story."

The Aussie eased against the yen as a defensive US dollar lifted the Japanese currency. The Aussie was down at 81.16 yen, from Monday's 82.39. Aussie bond futures had a mixed showing. Three-year bond futures gained 0.01 point to 95.14, and ten-year bond futures eased 0.025 points to 94.505.

The implied yield curve steepened to 63.5 basis points, from Monday's 60. Record low US rates have taken a toll on the US dollar this year, with investors eager to sell the currency in favour of higher-yielding ones to boost returns.

The downward trend in the US dollar should continue next year, Grace said, to the benefit of the Aussie. He forecasts the Aussie to edge up to $US0.9300 by December 31, before climbing further to $US0.9800 by June 2010.

Against the yen, the Aussie may hit 81.84 by year-end, and then 93.10 by June 2010. Not all analysts believe the ailing US dollar is set for another pounding next year, however. Bank of America-Merrill Lynch advised clients the US dollar should rise against most G10 currencies next year, but should weaken against many major currencies from emerging economies.

The Aussie, the bank said, falls into a category of "growth currencies" that have a "genuine reason to outperform" due to a robust local economy. Local data out on Tuesday supported Australia's rosy economic prospects. Businesses stayed remarkably upbeat in November despite a second rise in interest rates, a survey showed, suggesting the economy could weather further tightening ahead.