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Australia, NZ dollars rise above 1-month lows in rangebound trade

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The Australian and New Zealand dollars moved off recent one-month lows on Monday but stayed in a narrow band, with traders sidelined by US political turmoil and ahead of the Federal Reserve's annual Jackson Hole event.

[SYDNEY] The Australian and New Zealand dollars moved off recent one-month lows on Monday but stayed in a narrow band, with traders sidelined by US political turmoil and ahead of the Federal Reserve's annual Jackson Hole event.

The Australian dollar held at US$0.7924, far removed from Tuesday's US$0.7808, the lowest level since July 18. The Aussie is down about 1 per cent so far this month after solid gains in June and July.

The New Zealand dollar held on to Friday's gains, changing hands at US$0.7318. It fell to US$0.7224 last Wednesday, its lowest since July 12, but has since rebounded.

The kiwi is down 3.4 per cent this month after posting falls for three straight weeks.

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Analysts expect the antipodean currencies to trade around current levels in the near term, aided by firmer commodity prices and persistent weakness in the US dollar.

"The fundamental downtrend in the USD is intact because muted US inflation pressures will continue to weigh on US interest rate expectations," Elias Haddad, currency strategist at Commonwealth Bank of Australia, said in a note.

"AUD/USD will remain supported by the structural improvement in Australia's current account deficit, positive real interest rates spread between Australia and the United States, and firmer iron ore prices."

The Aussie has outperformed the New Zealand dollar in recent days, nearing a 3-1/2 month peak of NZ$1.0825, largely led by a rally in the price of iron ore, Australia's biggest export earner.

Some traders were wary ahead of a general election in New Zealand next month. Labour leader Jacinda Ardern is seen as a strong challenger to Prime Minister Bill English.

"We still expect to see the cross at NZ$1.1000 ahead of the election, and it will go further still if Ms Ardern ends up as PM," said Sean Keane of Triple T Consulting.

Elsewhere, traders will keep an eye on the Jackson Hole Economic Symposium where Fed chair Janet Yellen is due to speak.

But after minutes from the Fed's latest meeting showed members expressing concern about soft inflation, she is not likely to give new guidance on policy, Fed observers say.

Political tensions in the White House are also keeping traders on the edge.

Reports of the departure of senior White House adviser Stephen Bannon, known for his economic nationalist views, were confirmed on Friday. Mr Trump's decision to fire Mr Bannon could undermine his support from far-right voters but might ease tensions within the White House and with party leaders.

New Zealand government bonds eased, sending yields 3 basis points higher.

Australian government bond futures slipped, with the three-year bond contract down 1 tick at 98.040. The 10-year contract fell 1.50 ticks to 97.3700.

REUTERS

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