SYDNEY/WELLINGTON: The Australian dollar steadied on Wednesday, a day after suffering its biggest one-day fall in nearly a month, while its New Zealand counterpart marked time ahead of the outcome of a widely-watched Federal Reserve meeting.
The US central bank is expected to chop another $10 billion from its monthly bond purchases but was seen unlikely to make other concrete policy moves, leaving the focus on any clues to longer-term plans for interest rates. "With updated forecasts in interest rates, employment and inflation along with Chairwoman Yellen's press conference, there will be plenty to work with," said John Kicklighter, chief currency strategist at DailyFX in New York.
For now though, traders said the market was simply treading water with investors reluctant to take big positions ahead of the key event risk. The Aussie was steady at $0.9337, having fallen 0.7 percent on Tuesday after minutes of the Reserve Bank of Australia's June 3 meeting struck a dovish tone.
Traders see initial support in the 0.9320/30 zone, an area that provided a base in early May and then turned resistance after the Aussie broke decisively lower in mid-May.
The level also represents the 50 percent retracement of its most recent rally from $0.9229 to $0.9348. The New Zealand dollar was similarly subdued at $0.8661 , having drifted up from $0.8642 hit overnight.
The kiwi had stumbled against a broadly stronger US dollar on Tuesday after data showed US consumer prices recorded their largest increase in more than a year in May.
"NZD weakened after a bigger-than-expected rise in US inflation. Should the Fed surprise with a more hawkish stance tonight, this move could extend," ANZ analysts said in a note.
Indeed, market participants said that a hawkish Fed could knock the kiwi below hourly support around $0.8650, which would open the door towards $0.8600.
At the same time, few in the market were keen to push the kiwi much lower ahead of first quarter GDP data, given that a strong reading could boost the currency back towards $0.8700. Technical signs point to razor-thin trading ranges in the near term, as the kiwi hovered near the top of its daily Ichimoku cloud at $0.8667.
A move above this would be bullish, although trendline resistance was seen at $0.8688.
The kiwi barely budged against most major currencies, keeping its value against a currency basket around 80.85, little changed from the start of the week.
But it outperformed its Aussie peer, which slipped to a three-week trough of around NZ$1.0765.
Tracking a fall in US Treasuries, Australian and New Zealand government bonds lost ground. That pushed NZ yields as much as 3.5 basis points higher along the curve.
Australian government bond futures also eased, with the three-year bond contract down 3 ticks at 97.160. The 10-year contract dipped 4.5 ticks to 96.245.
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