Australia, NZ dollars hold their ground in cautious trade

[SYDNEY, WELLINGTON] The Australian and New Zealand currencies held their ground on Wednesday with markets in an uncertain mood following attacks in Brussels that killed at least 30 people.

With Asian equity markets suffering only modest declines, the Aussie - usually sold off in times of heightened risk aversion - was a touch higher at US$0.7628.

It was little changed against the safe-haven Japanese currency at 85.59 yen, having recovered from a slide to 84.08 overnight.

"While the news will likely have limited short-term impact on the global FX markets, traders were busy digesting this tragic event overnight," said Stephen Innes, senior trader at FX and CFD broker OANDA Australia and Asia Pacific.

Islamic State claimed responsibility for suicide bomb attacks on Brussels airport and a rush-hour metro train in the Belgian capital, with police hunting a suspect who fled the air terminal.

Given the uncertainty, traders said there is a lack of market conviction. The New Zealand dollar shuffled in a narrow range of US$0.6738-US$0.6769, near where it closed in New York. The kiwi shed 0.3 per cent on the yen to 75.63.

Government bonds followed a negative lead from US Treasuries, where prices fell after more Federal Reserve officials advocated hikes in US interest rates this year.

Philadelphia Fed President Patrick Harker said the Fed should consider another hike as early as next month if the US economy continues to improve as it has of late.

New Zealand government bonds eased, sending yields up to 6.5 basis points higher.

Australian government bond futures also slipped, with both the three-year and 10-year bond contracts down 6 ticks at 97.970 and 97.3400 respectively.

REUTERS