The Australian and New Zealand dollars held around recent ranges on Thursday after a rollercoaster ride earlier as a hawkish policy tone by the Federal Reserve triggered a brief rally in the US currency. The Australian dollar went as low as 0.7530, a level not seen since early June. It then climbed to $0.7582 as the greenback's gains faded and was last down 0.2 percent at $0.7562.
The Aussie has been stuck in a $0.7515/7620 range for several days. It broke the band to go as high as $0.7677 last week, but failed to stay at those levels as the US dollar gathered momentum. The New Zealand dollar was last up 0.2 percent at $0.7037 after earlier falling to $0.6975, its lowest since June 1. New Zealand government bonds rose, sending yields about 1 basis point lower across the curve.
Australian government bond futures gained, with the three-year bond contract up 4.5 ticks at 97.830. The 10-year contract added 6 ticks to 97.2775. The US central bank lifted benchmark rates by a quarter percentage point, as widely expected, for a second time this year. It also ended its pledge to keep rates low enough to bolster the economy for "some time" and signalled it would tolerate above-target inflation at least through 2020. Policy makers are now projecting two more rate increases by the end of this year, compared to one previously.
"The Fed's latest hike confirms that US growth is strong and this is good for Australia's" export-dependent economy, AMP Chief Economist Shane Oliver said in a note. "However, the Reserve Bank of Australia (RBA) is a long way from following the Fed higher in terms of interest rates because there is still a lot more spare capacity in the Australian labour market compared to the US"