By Cecile Lefort
SYDNEY/WELLINGTON (Reuters) - The Australian and New Zealand dollars were off multi-month highs on Tuesday with investors cautious ahead of the U.S. Federal Reserve's two-day policy meeting where it is expected to start slowing its massive stimulus program.
The Aussie edged lower to $0.9300 (59 pence), from $0.9317 in early trade, pulling away from a three-month peak near $0.9400 set on Monday.
It showed a muted reaction to minutes of the Reserve Bank of Australia's September policy meeting which kept the door open to further interest rate cuts, though it showed no urgency to move.
The Aussie has gained more than 3 percent since late August, partly because markets judged the RBA had turned more neutral on policy. Yet the central bank has been hoping the currency would fall further to help cushion the domestic economy.
"The AUDUSD has risen more than 3 cents since the RBA last met and unless this is reversed in the coming days and weeks, the risk is that the RBA could not only talk down the currency at its next meeting, but also re-introduce an explicit easing bias," said Alvin Pontoh, a strategist at TD Securities in Singapore.
Markets are only pricing in around 1 basis point of easing on a 12-month horizon. A majority of economists expect a rate cut by year-end as the RBA looks to stimulate non-resource sectors to replace a peak in the mining boom.
Support for the Aussie was found at $0.9260, with resistance around $0.9330, ahead of Monday's three-month peak of $0.9393.
The New Zealand dollar marked time at $0.8170, having powered up to $0.8234 on Monday, a level not seen since mid-May.
Much of the recent gains were due to U.S. dollar weakness following the surprise withdrawal of Lawrence Summers from the Federal Reserve race. Investors were wagering that U.S. monetary policy would stay easier for longer should the other leading candidate for Fed chair, Janet Yellen, get the job.
The next flash point is the outcome of the Federal Reserve meeting on Wednesday. Despite a lacklustre August jobs report, the U.S. central bank is expected to begin reducing its monthly asset purchases by about $10 billion, from the current $85 billion.
Near-term support for the kiwi was seen at $0.8155 with resistance initially around $0.8205 ahead of a more substantial hurdle at $0.8273.
New Zealand government bonds edged lower, sending yields 2.5 basis points higher along the curve.
Australian government bond futures also lost ground with the three-year bond contract plumbing three-month lows. It was down 5 ticks to 96.900 and a break under 96.860 would open the way to a retracement to 96.800, the March bottom.
The 10-year contract retreated 5.5 ticks to 95.880.
(Editing by Kim Coghill)