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Australian dollar at one-week top, NZ$ higher; Fed meeting looms

[SYDNEY] The Australian dollar on Wednesday rose further above a recent six-month trough, driven in part by talk of future flows related to multi-billion dollar M&A deals, while its New Zealand cousin made a new one-month top.

The Australian dollar climbed as far as US$0.7580 overnight, a level not seen since Dec 6. It was last up 0.2 per cent at US$0.7573.

The Aussie hit a six-month trough of US$0.7501 last week but has since crept up steadily.

The latest lurch higher came after Europe's biggest property firm Unibail-Rodamco said it will buy mall operator Westfield for US$16 billion in what would be the biggest takeover on record of an Australian company.

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In a separate deal, Zurich Insurance agreed to buy Australia and New Zealand Banking Group's life insurance arm for A$2.85 billion, its biggest foray into Australia and its third in the last two years.

"M&A activity has been the big driver for the Australian dollar," said Rodrigo Catril, senior forex strategist, National Australia Bank.

"While the (Westfield) deal won't likely be closed until mid-2018, the FX market has moved to anticipate the associated hedging of the cash proceeds back to AUD."

Against the euro, the Aussie rose to a one-week high at A$1.5515 per euro.

The US currency was also weighed down by signs Democrat Doug Jones might win in Senate race in Alabama and perhaps complicate passage of the Republicans' tax bill.

Investors next await a rate decision from the US Federal Reserve as well as its policy outlook for 2018. The Fed is considered certain to raise rates on Wednesday, but there is doubt on whether it will stick to a projection of three more hikes next year or perhaps forecast four instead.

If there's a hike on Wednesday, just one more increase would take US rates above those in Australia for the first time since 2000.

The New Zealand dollar added 0.2 per cent to US$0.6946, the highest since early November.

The kiwi has been on an uptrend since the appointment of Adrian Orr as the governor of the Reserve Bank of New Zealand.

Orr, a former central banker, is seen as a safe pair of hands who can likely avoid a radical shake-up of monetary policy when changes to the RBNZ's mandate come into force next year.

Technical analysts see key chart resistance at US$0.6950, while support lies around US$0.6815.

New Zealand government bonds rose, sending yields about 1 basis point lower.

Australian government bond futures eased, with the three-year bond contract down 3.5 ticks at 97.975. The 10-year contract slipped 1.75 ticks to 97.4425.

REUTERS

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