SYDNEY, Aug 20 (Reuters) - The Australian dollar stepped back from a recent 1-1/2 year high on Thursday against a resurgent greenback after the U.S. Federal Reserve wrong-footed dollar bears by staying silent on its policy outlook.
The Australian dollar, which had hit an 18-month high of $0.7275 before the Fed meeting minutes were released, stumbled back below 72 cents and was last at $0.7173.
The Aussie has surged in recent weeks as expansionary central bank policies around the world have boosted investor appetite for risk while commodity prices have also risen.
Australia, meanwhile, has managed the coronavirus pandemic better than other countries, further boosting sentiment for the nation’s financial assets.
Analysts generally expect the Australian currency to stay well bid with the Fed still seen dovish even though minutes from its latest monetary policy meeting steered clear of spelling out its policy strategy.
“The (Fed) minutes did prove to be the volatility event that we had questioned, with the USD finding a solid short-covering rally,” said Pepperstone analyst Chris Weston.
“The question then is...do we respect this short-term USD rally in the hope it has legs or do we fade it and buy this pullback in gold and silver?” Weston added.
“I feel the Fed will remain dovish, there is little doubt about that when Congress can’t agree on fiscal (stimulus).”
Analysts will keep a close eye on the Jackson Hole Symposium next week where Fed chair Jerome Powell is likely to provide more clarity on the central bank’s policy outlook.
Later in the day, U.S. weekly jobless claims are expected to drop even further below one million, and markets are warily awaiting the Philadelphia Fed business index at 1230 GMT after a disappointing reading from New York earlier in the week.
The New Zealand dollar dropped almost 1.4% from its intra-day high to $0.6561.
The kiwi has underperformed the Aussie in recent weeks as the Reserve Bank of New Zealand has been a lot more dovish than its Australian counterpart and is even toying with the idea of launching negative interest rates. (Reporting by Swati Pandey; Editing by Ana Nicolaci da Costa)
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