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down on fiscal cliff stalemate

The Australian dollar is lower along with other risk currencies due to concerns about negotiations in the United States to avert the so-called fiscal cliff.

At 0700 AEDT on Thursday, the currency was trading at 104.93 US cents, down from 105.14 cents on Wednesday afternoon.

HiFX senior trader Stuart Ive said risk currencies such as the Australian dollar and New Zealand dollar were lower as investors prepared for the year’s end.

‘We have a fairly broad risk-off scenario at the moment,’ he said.

‘It does seem as though people are squaring up their books.’

A lack of development in US budget negotiations was also driving the markets, he added.

‘Risk has also come off on what appears to be a stalemate between (US president) Barack Obama and the House of Representatives,’ he said.

‘They don’t seem to be making any progress at all. We have (Republican speaker) John Boehner bringing forward his Plan B to the House, but Obama’s said he’s going to veto it.

‘There seems to be a certain amount of brinkmanship on this, and it’s not very good for the economy.’

Both parties are under pressure to introduce measures to avoid a series of tax hikes and spending cuts which are due to begin at the beginning of 2013.

Mr Ive said the Australian dollar could rise above 105 US cents, but would be unlikely to find much strength past that.