SYDNEY/WELLINGTON (Reuters) - The Australian and New Zealand dollars rebounded on Thursday, as the greenback lost momentum after minutes of the Federal Reserve's last policy meeting were seen as dovish, but gains were tempered on renewed fears of a U.S.-led trade war.
The Australian dollar <AUD=D4> added 0.1 percent to $0.7565 from a low of $0.7523 touched on Wednesday. The Aussie has fallen in each of the past three months but is set for a small gain in May.
The New Zealand dollar <NZD=D4> rose to $0.6921, well above a recent five-month trough of $0.6851 set last week.
The dollar's index against a basket of six major currencies <.DXY> <=USD> stepped back from a recent five-month high after the Fed noted a modest inflation overshoot "could be helpful."
The minutes still showed most policymakers thought it likely another interest rate increase would be warranted -- in line with market expectations.
The antipodean currencies have been under pressure from diverging monetary policies where the central banks in Australia and New Zealand have reiterated the need for rates to remain at record lows while the U.S. Federal Reserve has been on a tightening path.
"For now, the Federal Reserve remains on track to increase rates in June. Beyond June, the outlook is less certain," ANZ economists said in a note.
The Fed has already raised rates once earlier this year, following three hikes in 2017.
"Fiscal policy and trade disputes create uncertainties that may dampen business spending. And the outlook for inflation is not guaranteed, particularly given weak wage growth," ANZ added.
The Aussie and kiwi are also weighed down by the risk of a global trade war.
U.S. President Donald Trump said he was considering new tariffs on imported cars. On Tuesday, he said he was not pleased with recent trade talks with China.
The Aussie is often played as a liquid proxy for risk and the country's economic fortunes are closely tied to global growth.
New Zealand government bonds <0#NZTSY=> gained in line with U.S. Treasuries, sending yields 5 basis points lower.
Australian government bond futures rose to more than one-week highs, with the three-year bond contract <YTTc1> up 2.5 ticks at 97.79. The 10-year contract <YTCc1> added 4.5 ticks to 97.195.
(This version of the story removes reference to speech by RBA assistant governor which is no longer listed on the RBA's website)
(Editing by Jacqueline Wong)
