Nervous investors hang on US Federal Reserve decision Investor anxiety is building in global markets before the closely watched US Federal Reserve meeting on Wednesday, which is expected to shed more light on a possible pull-back of its asset-buying program. Financial markets have been on a roller-coaster ride for the past few weeks amid growing speculation of a wind-down of the US's bond-buying program, which has flooded markets with large amounts of liquidity. The Australian market started deep in the red on Monday, only to jump higher later in the session in another intraday reversal of fortunes. The S&P/ASX 200 Index closed 34.1 points higher at 4825.9. The All Ordinaries Index ended the day 29.5 points up at 4805. The S&P/ASX 200 Index volatility index has risen 40 per cent since the peak of the sharemarket on May 14. The Australian dollar has also had a bumpy ride, rising above US96¢ on Monday after falling to a 32-month-low of US93.25¢ last week. It was trading at US96.24¢ late on Monday. If Fed chairman Ben Bernanke suggested the central bank hoped to be in a position to taper its quantitative easing this year, his comments could drive up US dollar and US Treasury yields and see the Australian currency slip lower, Macquarie Bank senior economist Brian Redican said. A fall in the Australian dollar could also see foreign investors return to the local sharemarket after exiting at the start of the currency's recent slide, RBS Morgans senior trader Luke McElwaine said. Conversely, if Dr Bernanke's remarks suggested the stimulus withdrawal could proceed more slowly than markets expect, support for the US dollar and the 10-year treasuries could weaken, pushing the local dollar higher, Mr Redican said. The last time Dr Bernanke spoke, on May 22, financial markets entered a period of volatility. He had appeared to go harder on a possible slowing of stimulus than in his statement to the US Congress joint economic committee. The impact on Australia of the Federal Reserve's money printing has mostly been felt through the currency, which traded mostly above parity with the US dollar for about two years before its recent slide, JPMorgan economist Tom Kennedy said. Even though the rate cut that was delivered in May did help in lowering the currency, we think it's been mainly a US dollar strength story through indications in the market that the Fed will start to taper their asset purchases," Mr Kennedy said. At the same time NAB currency strategist Ray Attrill said that despite downward pressure on the dollar, the statement from the Federal Reserve meeting was not expected to be sufficiently strongly worded to "send the US dollar to the stratosphere" against its peers. Mr Kennedy expected Dr Bernanke to clarify that a tapering of the stimulus programs would not mean a tightening of monetary policy. "That's something that would settle markets a little bit and reinforce the story that there's still a long way to go in the US," he said.