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Australia dollar struggles at 75 US-cent barrier, kiwi ticks higher

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The Australian dollar struggled at the crucial 75 US-cent barrier on Wednesday despite punching through it several times, dragged by concerns about the country's job market and ahead of the US Federal Reserve meeting.

[SYDNEY] The Australian dollar struggled at the crucial 75 US-cent barrier on Wednesday despite punching through it several times, dragged by concerns about the country's job market and ahead of the US Federal Reserve meeting.

The Australian dollar slipped 0.1 per US cent to US$0.7490, after two straight days of gains.

The currency has recently been restrained by a resurgent US dollar after the victory of Donald Trump in the US presidential elections last month sent both Treasury yields and the greenback soaring on expectations of higher inflation.

Investor attention is squarely on the Fed meeting later in the day which is expected to hike interest rates for the first time this year. Markets have almost fully priced in a quarter-point increase.

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The outcome of the Fed's policy meeting will be announced at 1900 GMT Thursday, followed by Chair Janet Yellen's news conference half an hour later.

Also due on Thursday is Australian jobs data which has recently been heavily skewed towards part-time employment, raising worries about inflation outlook for the country.

"Traders are concerned that the current rush towards part-time workforce at the expense of full-time employment numbers could eventually be a concern for the Reserve Bank of Australia (RBA) if the current trend intensifies," said Stephen Innes, senior currency trader at Oanda Australia and Asia Pacific.

The Aussie has, however, fallen in only four out of the last 10 sessions, largely led by rising commodity prices and carry trades where investors borrow in safer currencies such as the yen for high-yielding assets.

The Aussie is set for its first annual gain in three years, up 2.9 per cent so far.

Elsewhere, the Aussie struggled against its New Zealand counterpart, falling 0.3 per cent for its second straight session of losses. The Aussie is still up 2.2 per cent this year.

It continued its winning streak against the Yen though, rising for a seventh straight day, thanks to yield trade.

The New Zealand dollar did better than its antipodean cousin, rising 0.2 per US cent to US$0.7214, marking a third straight day of gains.

Analysts expect the uptrend to remain intact with the next stop for the Kiwi seen at US$0.7265, helped by a sound economic outlook and firmer dairy prices.

"That will probably be reached if there's a bout of long-USD profit-taking post Fed tonight," said Imre Spizer, senior strategist at Westpac.

New Zealand government bonds inched higher, sending yields about down 1 basis points across the curve.

Australian government bond futures climbed too, with the three-year bond contract up 3 ticks at 98.095. The 10-year contract added 3.6 ticks to 97.2325.

REUTERS

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