ET:Australian, New Zealand dollars wary of Fed meet
SYDNEY/WELLINGTON: The Australian and New Zealand dollars shuffled sideways on Wednesday as investors anxiously waited to see if the Federal Reserve can calm markets over speculation it will start tapering its asset buying before the year is out.
"Nothing much will happen until the big event. It really comes down to the press conference and whether Fed Chairman Ben Bernanke gives the idea there might be a policy change soon or later, that's the main issue for markets," said Joseph Capurso, currency strategist at Commonwealth Bank.
Unfortunately nobody is sure what position Bernanke will take, or how markets will choose to interpret his stance. The Fed's policy statement is due at 1800 GMT with Bernanke's news conference half an hour later.
As a result many investors continued to give the Aussie a wide berth. To make matters worse, it has been sold not only as a commodity currency but also as a liquid proxy for emerging Asian markets which are under intense pressure right now.
Speculators have been particularly keen to short the Aussie against the euro, which has climbed 15 per cent on the Aussie since early April. On Wednesday the euro was at A$1.4116 , near a 22-month high of A$1.4237 set last week. A break there will target A$1.4340, the peak from March 2011.
Against the dollar, the Aussie was flat at $0.9488, but it remained vulnerable to another test of a 33-month trough of $0.9325 plumbed on June 11.
Also subdued, the New Zealand dollar stood at $0.7991 , having drifted roughly between $0.7961/95 on the day. The euro was also steady at NZ$1.6753, not far off an 18-month peak of NZ$1.7108 set earlier in the month.
Data on Wednesday showing an expected narrowing in New Zealand's annual current account deficit offered little incentive for investors to buy kiwi.
The next piece of local data of interest is first quarter gross domestic product data due on Thursday.
HSBC's flash report on factory activity in China, due on Thursday, will also be very closely watched. Any disappointment will give investors a fresh excuse to sell both the Aussie and kiwi.
China is the single biggest export market for both Australia and New Zealand and developments there tend to affect the Antipodean currencies.
Government bonds saw little action ahead of the Fed. Australian debt futures slipped with the three-year contract 0.02 points lower at 97.430. The 10-year contract eased 0.030 points to 96.570. New Zealand government bonds were slightly off colour with yields a touch higher across the curve.
