Australia, NZ dollars ease against greenback ahead of Fed meeting

[WELLINGTON] The Australian and New Zealand dollars eased within a narrow trading band on Monday as the greenback strengthened in anticipation that the US Federal Reserve will cut interest rates this week.

Having eased in the two previous sessions, the Australian dollar fell as low as US$0.7431, remaining with the same US$0.7414-US$0.7509 trading range it has travelled in the past week. It last traded at US$0.7456.

The US central bank is widely expected to hike interest rates for the first time in 2016 at a two-day meeting that begins on Tuesday.

"The key focus for the market will be the press conference by chair Janet Yellen following the meeting as well as the updated economic projections known as the 'dot plots'," James Woods, Sydney-based global investment analyst at Rivkin Securities.

Investors will be scrutinising the 'dot plots' for signs of any change following Donald Trump's surprise victory in the US presidential election on Nov 8.

Also helping the greenback is solid gains in oil prices after Opec and other producers over the weekend reached their first deal since 2001 to jointly reduce output in order to rein in oversupply and prop up the market.

"This may help keep a cap on the NZD and AUD at the start of the week," said Kymberly Martin, senior strategist, BNZ Markets.

A series of downbeat data last week that pointed to further weakness in Australia's job market is likely to add further pressure on the Aussie. Employment data is due Thursday.

Both the Aussie and its New Zealand counterpart were sturdy against the yen, in a sign of higher risk appetite.

The Aussie rose 0.2 per cent on the yen to a near eight-month high while the Kiwi stood near a one-year peak.

Against the greenback, the Kiwi stood at US$0.7135 after falling 0.5 per cent in the previous session.

New Zealand government bonds fell, in line with US Treasuries, sending yields higher about 4 basis points across the curve.

Australian government bond futures eased too, with the three-year bond contract down 2.5 ticks at 98.035. The 10-year contract slipped 4.25 ticks to 97.1675.

REUTERS