The Australian dollar is still lower, failing to have much of a reaction to the head of the Reserve Bank of Australia’s testimony to a parliamentary committee.

At midday AEDT on Wednesday the local unit was trading at 89.14 US cents, down from 89.51 cents on Tuesday.

In the early hours of Wednesday morning, it dropped as low as 88.82 US cents, its weakest level since August 5.

While RBA governor Glenn Stevens was speaking, the currency rallied to the morning high of 89.29 cents.

Easy Forex currency dealer Tony Darvall said the small rally could be because Mr Stevens did not aggressively talk down the currency as he has in recent weeks.

‘‘That’s indicating the market was underwhelmed by the jawboning from Stevens this time around,’’ Mr Darvall said.

‘‘It’s off quite a low level so it’s nothing major just yet.’’

Markets will now focus on the outcome of the US Federal Reserve’s two-day policy meeting, which finishes early on Thursday morning, Australian time.

The Fed is expected to make an announcement on the timing of winding back its $US85 billion-a-month bond buying program.

Mr Darvall said he expected the Australian dollar to trade in a tight range ahead of the Fed announcement as traders awaited the decision.

‘‘The market is a bit 50-50 on whether they are going to taper,’’ he said.

‘‘If they taper, the Aussie dollar is going to come under selling pressure; if they don’t, then the Aussie will have a short squeeze above 90 US cents but above 90 US cents will be very hard going for the Aussie.’’

Meanwhile, the Australian bond market was mixed.

At midday the March 2014 10-year bond futures contract was trading at 95.805 (implying a yield of 4.195 per cent), down from 95.810 (4.190 per cent) on Tuesday.

The March 2014 three-year bond futures contract was at 97.050 (2.950 per cent), up from 97.030 (2.970 per cent).

AAP