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Dollar underpinned by Fed rate expectations, Aussie shines

by Paul

Underpinned by expectations U.S. rates will rise by the year-end, the dollar held steady in Asia trading on Wednesday, just below a near nine-month peak struck overnight, while the Australian dollar gained as inflation data doused chances of a rate cut there.

Consumer prices rebounded by more than forecast last quarter in Australia, while the annual pace of core inflation edged up for the first time in over a year, leading investors to price out almost any chance of a near-term cut in interest rates.

The Reserve Bank of Australia holds its monthly policy meeting next week and is expected to keep rates at a record low 1.5 per cent.

“We’ve seen Aussie buying against the crosses, so Aussie outperformance is the main theme in the Asian session, with it testing recent highs around that 77-figure area,” said Sue Trinh, head of Asia FX strategy at Royal Bank of Canada in Hong Kong.

“The question, though, is whether it can sustain levels above there.”

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