$A firms ahead of US Fed meeting

THE Australian dollar is firmer as traders position themselves ahead of the US Federal Reserve's quarterly meeting.

Australian dollar

The Australian dollar is firmer as traders position themselves ahead of the US Federal Reserve's quarterly meeting.

At 1200 AEST on Monday, the currency was trading at 96.13 US cents, up from 95.94 cents on Friday.

The momentum has occurred despite a weaker local share market which, like the Australian dollar, is usually tied to risk appetite.

Commonwealth Bank currency strategist Joseph Capurso said that while a low level of liquidity was a bigger factor in the Australian dollar's rise, some traders were buying the local currency ahead of the US Fed's quarterly meeting.

"The risk is that the US dollar weakens after the Fed meeting and that will push the Aussie dollar up," he said, adding that the local currency could touch 97 US cents by the end of the week.

Financial markets will be watching the Fed meeting for any indication of a change to its third round of bond purchases, known as quantitative easing (QE).

Meanwhile, Australian bonds were weaker at noon.

At 1200 AEST on Monday, the June 10-year bond futures contract was trading at 96.605 (implying a yield of 3.395 per cent), down from 96.630 (3.370 per cent) on Friday.

The June three-year bond futures contract was at 97.400 (2.600 per cent), down from 97.420 (2.680 per cent).
The June contracts expired at noon.

The September 10-year bond futures contract was trading at 97.620 (implying a yield of 2.380 per cent), down from 97.635 (2.365 per cent) on Friday.

The September three-year bond futures contract was at 97.455 (2.545 per cent), down from 97.475 (2.525 per cent).