The Aussie dollar has pared overnight gains coinciding with selective weakness from local and Asian equity markets. The local unit kicked off the session with convincing gains above 105 US cents but failed to maintain the momentum seen overnight falling to lows of 104.64 US cents. It appears there's general lethargy rather than any particular theme guiding the local units fortunes today with this morning's weaker than expected construction data failing to have any significant impact on price action.

Japans Finance Minister Yoshihiko Noda today announced the introduction of a $100 billion facility in an effort to stem the Yen ascent by encouraging the purchase of foreign assets through M&A activity. Noda also announced a requirement for financial institutions to report currency exposures until the end of September. The Yen failed to see any relief with the USDJPY pair falling from Y76.75 to intraday lows of Y76.53 in the ensuing period. Judging by subsequent Yen price action, the latest measures failed to appease the market which is largely desensitized to the noise from the Bank of Japan/Ministry of Finance attempts to talk the currency lower.  It's clear the once trigger-happy Japanese authorities have gone a little gun shy with recent efforts to unilaterally intervene directly providing no decisive relief. Earlier today ratings agency Moody's also downgraded Japans government debt rating by one notch citing large budget deficits and the build-up in Japanese government debt since the 2009 global recession.

As anticipated, the talk around the traps this week is all about Bernanke's address at Jackson Hole on Friday, with many market participants expecting the Fed boss to use it as a platform to indicate the need for further stimulus. While we agree Bernanke may use this event as a platform to inspire some confidence by indicating what's left in the Fed's bag of tricks; we do not expect any direct signal to the market suggesting another round of QE is on the cards in the near-term, given the risk to price stability. Recent inflation data suggest core inflation rose at an annual pace of 1.8% - between the Fed's unofficial 1.7 - 2% target - clearly not an ideal time to spur inflationary pressures.

Economic data in focus tonight includes German IFO and Euro-zone Industrial orders with U.S. durable goods also on the bill. At the time of writing the Aussie dollar is buying 104.95 US cents.