Australian dollar hits 9-week low, rounds out a rough month

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.

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. 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.

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.

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.

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.

“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.

“At the margin, however, today’s relatively benign CPI data support our view that the cash rate has already peaked.”

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.

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.

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.

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.