Dollar steady ahead of Yellen speech

The local unit is trading in a tight range as markets await comments from the Federal Reserve chair.

The Australian dollar has also rallied against the New Zealand dollar.

The Australian dollar is hovering just below US77 cents as traders wait for more potential clues from US central bank chief Janet Yellen on the timing of an expected interest rate hike.

At 5pm (AEST) on Wednesday, the local unit was trading at US76.85c, up from 76.78 US cents on Tuesday.

Risk sentiment was boosted by Hillary Clinton’s solid performance against Donald Trump in the first US presidential election debate on Tuesday, giving the Australian dollar a slight boost overnight and into Wednesday.

But with little economic news to drive trade on Wednesday, the currency moved within a tight range ahead of the appearance of the US Federal Reserve chair before Congress on Wednesday night, Australian time.

“The improvement in risk appetite gave the Aussie a nice rally on Tuesday but it pulled back during the overnight session with traders reluctant to push it above 77 cents,” easyMarkets chief market strategist Anthony Darvall said.

“The next big event that can move the currency is Yellen’s testimony.” If Ms Yellen shows hesitation in wanting to lift US interest rates before the end of the year, the US dollar will fall and currencies like the Aussie dollar will rise, Mr Darvall said.

The Australian dollar has also rallied against the New Zealand dollar, heading closer to $NZ1.06, ahead of the Reserve Bank of Australia’s cash rate decision next week.

Mr Darvall said that move has been significant given the currencies were close to parity earlier this month.

“The next RBA meeting is expected to clarify whether they have gone neutral and won’t cut the cash rate any more this year,” he said.

The market expects the RBA to hold off from further cuts, while New Zealand’s central bank has signalled continued cuts.

AAP