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Australia, NZ dlrs up slightly ahead of Yellen's take on Fed outlook

Published 25/08/2016, 01:19 pm
Australia, NZ dlrs up slightly ahead of Yellen's take on Fed outlook
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SYDNEY/WELLINGTON, Aug 25 (Reuters) - The Australian and New Zealand dollars were marginally up on Thursday as investors counted down to a much-anticipated speech by Federal Reserve Chair Janet Yellen for more clarify on the outlook for U.S. interest rates.

The Australian dollar AUD=D4 was up 0.2 percent at $0.7627. It is mostly unchanged so far this week, trapped in a tight range of $0.7584 to $0.7655.

The Aussie has added more than 5 percent in the last two months but has been muted in August largely due to conflicting views on U.S. monetary policy.

Investors are now looking to Yellen's speech in Jackson Hole, Wyoming, on Friday for insight on the U.S. monetary policy outlook.

"Janet Yellen's appearance on Friday is the only big talking point in markets and in the meantime leaves FX, stocks and bonds lacking direction," said Ray Attrill, global co-head of FX strategy at National Australia Bank.

"If there were to be a shock from Yellen it would be that she plays up risk of a rate rise at the 20/21 September FOMC meeting."

Fed fund futures 0#FF: imply around a one in four chance of a September rate hike, rising to around a 50 percent chance by December. A quarter-point hike is not fully priced in until August next year.

The antipodean currencies have been resilient in the face of domestic interest rate cuts this year due to carry trades where investors borrow at low rates in yen, pounds or euros to buy higher-yielding assets such as the Aussie and kiwi.

The Aussie is up nearly 5 percent this year while the New Zealand dollar NZD=D4 has climbed 7.4 percent.

On Thursday the kiwi was trading 0.2 percent higher at $0.7327 after dairy giant Fonterra lifted its forecast payout to its 10,500 farmer shareholders.

The dairy co-operative lifted the forecast by NZ$0.50, which brought the total payout available to farmers in the 2016-17 season to NZ$$5.25 to NZ$5.35. The news will cheer farmers who have struggled with weak global dairy prices.

New Zealand government bonds 0#NZTSY= were mostly lower in price, with yields higher through much of the curve.

Australian government bond futures barely moved, with the three-year bond contract YTTc1 at 98.63 and the 10-year contract YTCc1 at 98.13.

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