Forex - Aussie dollar slumps after Westpac survey, ahead of Fed meet

Investing.com - The Australian dollar slumped on Wednesday after a disappointing survey on growth prospects and ahead of a key Federal Reserve monetary policy announcement later in the day.

The New Zealand dollar fell furthery after the current account deficit shrank from 2.7% of GDP to 2.5% for the year to June 2014, with the broader focus on the Federal Reserve.

NZD/USD traded at 0.8176, down 0.28%. AUD/USD traded at 0.9072, down 0.25%, while USD/JPY changed hands at 107.26, up 0.14%.

Australia's August Westpac-MI leading index fell 0.09 point to 98.05, continuing below trend since February.

"Overall, we can conclude that commodity prices have intensified their drag on the growth rate; the slowdown in dwelling approvals has led to a reversal in the effect which that series is having on the index; consumers are less nervous around the labor market; and the flattening of the yield curve has become a drag on growth," said Westpac's chief economist Bill Evans.

Overnight, the dollar edged lower against most major currencies in afternoon trading as investors backtracked on previous bets the Federal Reserve's monetary policy statement due out Wednesday could contain hawkish language.

The Federal Reserve will announce its latest statement on monetary policy this Wednesday, and expectations for the U.S. central bank to cut its monthly bond-buying program to $15 billion from $25 billion kept the greenback firm.

Investors were also hoping to see a timetable as to when U.S. interest rates may rise, though by afternoon trading, Wall Street Journal reporter Jon Hilsenrath said in a webcast that the Fed will say rates will remain low for a "considerable time," a phrase the bank often uses, and instead focus more on wording the closing of its bond-buying program.

Hilsenrath's opinion found followers, as investors took up positions betting that the Fed will try avoid overwhelming markets by discussing the end of stimulus programs alongside a change in forward guidance, leaving the latter for a future policy meeting.

Elsewhere on Tuesday, official data showed that U.S. producer price inflation was flat last month, compared to expectations for a 0.1% rise after a 0.1% gain in July.

Core PPI, which excludes food, energy, and trade rose 0.1% in August, in line with expectations, after an increase of 0.2% in July.

The US Dollar Index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.06% at 84.28.

On Wednesday, markets will move on the Federal Reserve's statement on monetary policy followed by Fed Chair Janet Yellen's press conference.

Elsewhere, the U.S. is to produce data on consumer prices, while the euro zone is to release revised data on consumer price inflation.