The Australian dollar fell back below 73 U.S. cents on Wednesday while its New Zealand peer was weaker too as traders were hesitant to make bold bets ahead of the U.S. Federal Reserve meeting later in the day.
The Australian dollar <AUD=D4> held at $0.7297, easing from a two-week top of $0.7342 touched on Tuesday following minutes of the country's central bank's Sept. 1 policy meeting.
The keenly watched minutes stopped short of signalling a further cut to the cash rate, wrongfooting Aussie dollar bears who were wagering on a dovish tilt from the Reserve Bank of Australia (RBA).
The RBA has held the cash rate at 0.25% since an emergency meeting in mid-March but recently hinted at additional policy measures to support an economy reeling from its worst contraction in almost a century.
Interest rate futures <0#YIB:> currently imply the cash rate around 0.1% but analysts say that is no longer an indication of further policy easing.
The interest rate on balances held by financial institutions at the RBA as well as overnight interest rate swaps <AUDOIS=> are already trading around 0.1%, thanks to the extraordinary measures introduced by the central bank since mid-March.
Australian government bonds have been in solid demand too. The three-year bond futures contract <YTTc1> was at 99.740, not far from a four-month high of 99.748 touched earlier this week. The 10-year contract <YTCc1> was at 99.09.
Investor attention is now squarely on the Fed amid expectations the U.S. central bank will maintain its gloomy outlook on the economy grappling with the COVID-19 pandemic while holding rates near zero.
"We watch for the Fed's new economic projections, any clues on a potential shift in (bond) purchases to longer-dated durations, the lowering of the long-term dot projection from 2.5% to 2% and new forward guidance," said Pepperstone strategist Chris Weston.
"Let's see, but the USD will be key and depending on the reaction on inflation expectations will determine moves in real Treasury yields and this is where (equities), the dollar, gold etc will take their direction," he added.
The New Zealand dollar <NZD=D3> was last down 0.1% at $0.6707 following three straight days of gains.
Data out earlier showed the country's quarterly current account surplus surpassed expectations at NZ$1.83 billion when analysts were looking for a NZ$0.6 billion windfall.
The country reports its second-quarter gross domestic product on Thursday which is likely to show the country's steepest contraction on record.
(Reporting by Swati Pandey; Editing by Lincoln Feast.)
