Aussie dollar steady, kiwi slips amid US election uncertainty

[SYDNEY] The Australian dollar was largely flat on Monday ahead of a central bank policy meeting this week and amid nervousness about the outcome of the US elections.

The Australian dollar stood at US$0.7601, recovering from a two-week low of US$0.7558 hit on Friday.

Broader market sentiment was hit late last week after the US Federal Bureau of Investigation revealed a new probe into the private email use of Democratic nominee Hillary Clinton, days before the voting day.

Investors have tended to see Mrs Clinton as the candidate of the status quo, while there is greater uncertainty over what a Donald Trump victory might mean for US foreign policy, international trade deals or the domestic economy.

The greenback skid on the news of the FBI probe and edged lower on Monday, despite stronger-than-expected economic growth data, which bolstered the case for a US interest rate hike by the Federal Reserve.

"Markets, on Friday, demonstrated that they fear Trump as president far more than they fear the Fed," said Ray Attrill, global co-head of FX strategy at the National Australia Bank.

Locally, economists widely expect the Reserve Bank of Australia (RBA) to stay pat on interest rates at its monthly policy meeting on Tuesday.

"My sense is the RBA will continue to view rates as accommodative, but see little to be gained at this stage via a rate cut," said Stephen Innes, senior currency trader at Oanda Australia and Asia Pacific.

"It's been difficult to find a definitive trend on the Aussie of late, and that's unlikely to change with the US election risk starting to froth."

The Aussie has been resilient in the face of US dollar strength in recent weeks, rising more than 4 per cent this year helped by a rebound in the prices of iron ore and coal - Australia's biggest exports.

On Monday, the Aussie fared better against its New Zealand cousin, rising 0.2 per cent. It also gained on the yen, but barely moved against the euro and the British pound.

The New Zealand dollar slipped 0.2 per cent on Monday to US$0.7152, continuing to trade in a tight band.

"We need to see a break outside US$0.7035-US$0.7265 to signal medium-term direction," said Imre Speizer, senior market strategist at Westpac.

Traders will keep an eye on global dairy prices, employment data and the Reserve Bank of New Zealand's (RBNZ) survey of inflation due Wednesday.

New Zealand government bonds gained, sending yields 3.5 basis points lower at the long end of the curve.

Australian government bond futures gained, with the three-year bond contract up three ticks at 98.29. The 10-year contract rose 2.5 ticks to 97.67.

REUTERS