SYDNEY/WELLINGTON: The Australian and New Zealand dollars held firm on Tuesday with investors cautious of taking large bets ahead of central bank policy meetings later this week.
The Australian dollar paused at $0.8803, but remained well within the $0.8640-$0.8900 range seen this month, following a steep 6.3 percent fall in September.
The Aussie managed to end the New York session above 88 cents for the first time in two weeks, supported by a stabilisation in market volatility and commodity prices.
Also underpinning the Aussie was improving risk appetite with the move particularly reflected in Aussie-Yen. The Aussie was at 95.08, having gained more than 3 yen since hitting a six-month trough mid-October.
Still, investors remained prudent ahead of the US Federal Reserve's two-day policy meeting ending on Wednesday.
The central bank is widely seen reassuring markets that any interest rate hikes are a long way off even as it ends its massive bond-buying stimulus.
"There are a lot of expectations that the Fed will stop its quantitative easing and (after the meeting) we should see the Aussie pass $0.8820," said Annette Beacher, head of Asia Pacific research at TD Securities in Singapore. She noted, however, that key resistance of $0.8860 would be a tougher level to break unless there is a domestic development.
The next major economic event in Australia for the Australian dollar is the Reserve Bank of Australia's monthly policy meeting on Nov. 4.. The central bank is almost certain to keep rates at a record low of 2.5 percent as the economy wrestles with a waning mining boom.
The New Zealand dollar marked time at $0.7891, with investor attention on central bank statements.
The Reserve Bank of New Zealand (RBNZ) will release its latest statement on Thursday morning and is seen holding its cash rate unchanged at 3.5 percent. It is expected to massage its September message and signal that it will be on hold for an extended period given slower growth and subdued inflation.
Last week's inflation data put the annual rate at the bottom of the RBNZ's 1-3 percent target range, which has seen analysts push out the likely starting date for a resumption in tightening to the second half of next year.
The kiwi is expected to trade uneventfully ahead of the RBNZ's statement, taking its lead from broader market events.
"We expect the RBNZ to take the wait-and-see approach but repeat that the currency is at unjustified and unsustainable levels, which will limit the topside," said ANZ senior currency strategist Sam Tuck.
"But the downside will be limited by the fact the FOMC will probably maintain language about a considerable time before any rate action."
He said financial markets were still backing US dollar gains, but were likely wary of going too far without greater clarity from the Federal Reserve on policy. The Fed will release its statement a couple of hours before the RBNZ.
In the meantime, the kiwi is seen ranging between support at $0.7800 and resistance at $0.8000.
New Zealand government bonds were trading with a slight bid tone, that pushed yields a tick lower.
Australian government bond futures rose, with the three-year bond contract up 3 ticks at 97.430. The 10-year contract added 4 ticks to 96.515.
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