Some recent currency movements suggest a general quelling of geopolitical uncertainties and return of risk appetite ahead of the Federal Reserve’s interest rate decision later in the week.

The easing of certain concerning events, including U.S.-China trade talks, as well as the UK’s departure from the EU, has allayed mounting discord in the financial markets and spurred a rise in the prices of domestic government bonds.

The yield on the U.S. 10-year Treasury note was last bid at close to 1.84%, a rise of roughly 37 basis points since the beginning of September.

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In a further signal of a lift in risk-taking sentiment, the Australian dollar has recently staged a rise against safe-haven currencies such as the Swiss franc and Japanese yen. The Aussie has also gained against the dollar following a lengthy downturn amid heated trade skirmishes, which had left many investors worried about the country’s export relations with China – notably concerning iron ore.

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Marc Chandler, the chief market strategist at Bannockburn Global Forex, noted that the

base he observed that the Australian dollar carved out near $0.6800 “has been a sufficient springboard” to send it toward $0.6860 in Tuesday’s trading session.

The Aussie’s high last week was set near $0.6880, and last month’s peak was close to $0.6900.

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Chandler added that these levels “may stymie stronger gains until at least” the Federal Open Market Committee’s (FOMC) conclusion Wednesday to its two-day monetary policy meeting, when the policy-making arm of the Fed will release a statement on its decision, followed by a press conference from Chair Jerome Powell.

Market participants widely expect the FOMC to slash interest rates by another 25bps Wednesday, with implied probabilities last at 94%, according to Bloomberg.

The Fed has joined a chorus of global central banks that have been leaning at a dovish tilt, amid slowing global growth, underpinned by stubbornly low inflation, as well as contracting manufacturing sectors in several developed nations, including Germany and the broader Eurozone.

Australia’s central bank has also committed to a policy of accommodation for the country’s economy, having cut its cash rate three times since June to a historic low of 0.75%.

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In a speech delivered Tuesday in Canberra, Reserve Bank of Australia (RBA) governor Philip Lowe said that the bank is “prepared to ease monetary policy further if needed,” however, “it is extraordinarily unlikely that we will see negative interest rates in Australia.”

“It is likely though that we will require an extended period of low interest rates to reach full employment and for inflation to be consistent with the target.”

In the three months to June 2019, Australia’s Consumer Price Index (CPI) rose 0.6% over the prior quarter and 1.6% year-on-year. The levels were an improvement over the respective 0.0% and 1.3% registered in the March 2019 quarter, mainly on the back of a lift in automotive fuel (+10.2%).

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Lowe also pointed out the “unprecedented” levels of widespread negative nominal yields across the globe, with the entire Swiss government nominal bond yield curve in negative territory, along with most of the German, Dutch, French and Japanese yield curves.

Lowe continued that it is not only governments that can borrow at negative yields, as private companies, including Coca-Cola (NYSE: KO), Orange (NYSE: ORAN) and Siemens (OTCMKTS: SIEGY) have issued unsecured bonds with zero coupons and negative yields.

“All up, there are now US$14 trillion of bonds trading at negative yields around the world. And around a quarter of all government bonds globally are now trading at negative yields,” he added.

Investors will be keeping an eye on Australia’s dollar for any further upward moves against the Swiss franc, Japanese yen, and U.S. dollar, as the FOMC gets set Wednesday to announce its monetary policy decision, while the RBA is slated to decide on its next cash rate move on Monday, November 4.

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