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Australia, NZ dlrs edge up, hold nerves ahead of Fed

Credit: REUTERS/DANIEL MUNOZ

The Australian and New Zealand dollars nudged up on Wednesday as risk appetite got a boost from positive Sino-U.S. trade developments, although sentiment was cautious ahead of a key U.S. Federal Reserve speech.

By Swati Pandey

SYDNEY, Aug 26 (Reuters) - The Australian and New Zealand dollars nudged up on Wednesday as risk appetite got a boost from positive Sino-U.S. trade developments, although sentiment was cautious ahead of a key U.S. Federal Reserve speech.

The Australian dollar AUD=D3 was last up a shade at $0.7197 after rising almost 0.5% overnight.

The Aussie has had a solid run since hitting an 18-year trough of $0.5510 in March. It has posted positive monthly returns from April onwards and is on track for yet another monthly rise in August.

An earlier-than-expected reopening of the economy after curbing the spread of the coronavirus, better-than-feared economic data and higher commodity prices have been factors driving the Aussie.

The latest leg up came as U.S. and Chinese trade officials reaffirmed their commitment to a Phase 1 trade deal.

"These talks, a six-month review of the phase one deal stuck in January, were due earlier in the month, but had been delayed as tensions between the two countries remained heightened," said Steven Dolley, a currency strategist at Western Union Business Solutions.

"News that a successful phone call had been made, with both countries keen to see further progress, helped sentiment."

The New Zealand dollar NZD=D3 added 0.1% to $0.6555, having risen 0.3% overnight.

The kiwi has been worn down recently by a second wave of coronavirus infections in New Zealand's most populous city of Auckland, forcing it back into a lockdown.

In addition, the New Zealand central bank has sounded more dovish than its Aussie counterpart as it is considering launching negative interest rates.

Australia's central bank Governor Philip Lowe has repeatedly said negative rates were "extraordinarily unlikely" in the country.

The next major highlight for currency traders is the U.S. Federal Reserve's Jackson Hole symposium on Thursday where chair Jerome Powell is due to speak.

"Markets are on edge for a major policy announcement with the Fed potentially announcing a review of its inflation targeting program," Dooley added.

"The Fed might look to allow the U.S. economy to "run hot" for longer to boost inflation – a move that might boost U.S. shares and the Australian dollar over the longer term."

New Zealand government bonds 0#NZTSY= eased, sending yields about 3-4 basis points higher along the long end of the curve.

Australian government bond futures slipped, with the three-year bond contract YTTc1 down 1.5 ticks at 99.685. The 10-year contract YTCc1 was off 5.5 ticks at 99.04.

(Reporting by Swati Pandey; Editing by Shailesh Kuber)

((swati.pandey@thomsonreuters.com; +61 2 9321 8166; Reuters Messaging: twitter.com/swatisays))

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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