Dollar drifts as Fed eyed

The local unit has slipped as investors hold out for the Federal Reserve’s update.

The Australian dollar has fallen back as traders take a breather before the US Federal Reserve meeting.

At 5.45pm (AEST) on Tuesday, the currency was trading at US77.35 cents, down from 77.55c on Monday.

ThinkForex senior market analyst Matt Simpson said the dollar’s momentum has slowed ahead of busy week of data and central bank meetings in the US, Japan and New Zealand.

“Due to Anzac Day in Australia on Monday and anticipation of central bank meetings this week, Australian dollar crosses have paused for a breather as they await monetary policy decisions,” he added.

Mr Simpson said a hawkish statement by the US Federal Reserve board when it meets on Tuesday night (AEST) could push the Australian dollar higher this week.

“While we remain within the bullish channel a break above 78.50 US cent highs is likely and an attempt at 80 US cents,” he said. “However, as traders are aware Reserve Bank of Australia is now watching the exchange rate, I do not expect 80 US cents to break.” At 1700 AEST, the local currency was at 85.29 Japanese yen, down from 85.66 yen on Friday, and at 68.36 euro cents, down from 68.67 euro cents.

The market’s focus is now turning to next week’s busy central bank calendar, with the US Federal Reserve, the Reserve Bank of New Zealand and the Bank of Japan to decide on interest rates.

Meanwhile, the Australian bond market has also slipped slightly following sell-offs in US bond markets.

At 1630 AEST on Tuesday, the June 2016 10-year bond futures contract was trading at 97.350 (implying a yield of 2.650) down from 97.365 (2.635 per cent) on Friday.

The June 2016 three-year bond futures contract was at 97.960 (2.040 per cent), down from 97.970 (2.030 per cent).

AAP