SYDNEY: The Australian dollar slipped to a nine-week low on Wednesday as inflation data came in just under forecasts and led markets to lengthen the odds on another rate hike, at least in the near term.<\/p>\n
The miss was marginal but gave speculators an excuse to keep selling the currency after three straight weeks of falls. The Aussie eased 0.3% to $0.6963, bringing its losses this month to 2.8%. The next support levels are $0.6922 and $0.6866.<\/p>\n
Data showed the consumer price index rose 0.4% in August, under forecasts of 0.5% as drops in clothing and travel helped offset surging fuel costs. The annual pace still accelerated to 4.0%, with prices up broadly.<\/p>\n
The trimmed mean measure of core inflation rose 0.2% in August, again under forecasts of 0.3%, but the annual pace held at 3.6% for a third straight month.<\/p>\n
That remains far above the Reserve Bank of Australia’s target band of 2% to 3% and was a major reason it lifted rates to a 15-year high of 4.60% on Tuesday.<\/p>\n
Markets had been wagering on a hotter inflation result, so the miss was enough to see the chance of another hike in November drop to 20%, from 36% before the data.<\/p>\n
“The RBA is likely to remain in wait-and-see mode in the near term, as it looks for confirmation that disinflation will in fact take hold over the coming months,” said Abhijit Surya, a senior APAC economist at Capital Economics.<\/p>\n
“At the margin, however, today’s relatively benign CPI data support our view that the cash rate has already peaked.”<\/p>\n
The data were a relief for badly beaten bond markets, and 3-year debt futures bounced 8 ticks to 95.100. Yields on 10-year debt fell 5 basis points to 5.329% and away from 15-year peaks.<\/p>\n
The kiwi dollar held at $0.5640, after losing 0.5% on Tuesday to touch its lowest point this year at $0.56265. Support now lies around $0.5580 and $0.5512.<\/p>\n
It has been an especially tough month for the kiwi as it shed 4.7%, partly because the Reserve Bank of New Zealand had undershot the market’s very hawkish pricing for rates.<\/p>\n
Perhaps reacting to that slide, the central bank has since sounded more concerned about inflation, leading markets to price in a 70% chance of another hike in October. – Reuters<\/p>\n
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