Australian dollar near 1-week high; Fed and BOJ in focus

[SYDNEY] The Australian dollar traded near one-week highs on Monday as its U.S counterpart slipped with few expecting a Federal Reserve interest rate hike this week.

A A$9.7 billion (S$9.96 billion) sale of the Port of Melbourne to a group involving US and Canadian players also boosted sentiment and underscored the strong appetite for Australian assets.

The Australian dollar rose 0.57 per cent to US$0.7536, its highest level since Sept 13. Traders are looking at a break above US$0.7567 for further gains in the currency.

"You have a few people getting a little bit excited about the Fed meeting saying the rates are not going to go up," said Chris Weston, chief market strategist at IG Markets.

Interest rate futures imply a 12 per cent chance of the Fed raising interest rates this week, according to CME Group's FedWatch Tool.

"You're also seeing all commodity currencies doing well today," he added.

"And, there is a bit of yield play or carry-trade going on too."

Oil was the biggest mover in commodities rising around 2 per cent.

The Aussie is up about 3.5 per cent this year, thanks in large part to offshore interest in carry trades - where investors borrow at low rates in yen or euros to buy higher-yielding assets.

Apart from the Fed, investor focus will also be on the Bank of Japan's policy meeting on Sept 20-21.

In Australia, the central bank will release the minutes of its September meeting on Tuesday. The Reserve Bank of Australia's new governor Philip Lowe will appear before a parliamentary economics committee on Thursday, his first official appearance as chief.

The New Zealand dollar was also higher at US$0.7301, after falling 0.6 per cent on Friday. The kiwi has been trapped in a tight band of US$0.7238 and US$0.7331 in the last four sessions.

Local data continues to point to a strong economy, with consumer confidence edging higher and strength in the services sector. The kiwi may also get a boost should global dairy prices continue to storm higher at this week's auction.

New Zealand government bonds gained slightly, with yields 1.5 basis points lower at the short end and unchanged at the long end.

The Reserve Bank of New Zealand announces its latest policy decision on Thursday and is widely expected to hold rates at 2 per cent after a cut in August.

Of 17 economists polled by Reuters, 16 forecast the central bank to stand pat while one tipped a 25-basis-point rate cut to 1.75 per cent.

Australian government bond futures eased, with the three-year bond contract down three ticks at 98.410. The 10-year contract slipped two ticks to 97.865.

REUTERS