Australian dollar struggles ahead of CPI; NZD flat
WELLINGTON/SYDNEY: The Australian dollar slipped on Monday after lower-than-expected producer prices stirred speculation that upcoming consumer prices could also be benign, bolstering the case for the central bank to keep rates on hold for longer.
The Aussie dollar fell to as low as $0.9864 in the wake of the data showing a mere 0.1 percent quarterly increase in producer prices.
The annual rate was 2.7 percent. Both figures fell short of expectations for a quarterly increase of 0.5 percent and yearly rise of 3.1 percent.
"The latest business inflation result certainly surprised on the lower side of expectations," said Savanth Sebastian, an economist at CommSec.
"And if consumer prices are similarly restrained, then Reserve Bank policymakers will be able to stay on the interest rate sidelines well into the June quarter."
Still, the Aussie traded well within Friday's intraday range, indicating the market had not much conviction. But its repeated failure to reclaim parity meant that pressure was building for the currency to probe lower, traders said.
Last week's trough around $0.9830 was likely to provide first support, before a retest of this month's low around $0.9800. It last traded at $0.9881.
While there is little correlation between the producer price and consumer price reports, Tuesday's CPI data is expected to show underlying inflation running around 2.6 pct for 2010, well within the RBA's 2 to 3 percent target band.
Whatever the outcome though, no one expects the Reserve Bank of Australia to hike rates at its February policy meeting next week. Markets have priced in zero chance of an imminent rate rise and only 34 basis points worth of tightening over the next 12! months .
The interbank futures market isn't fully priced for a 25 bps hike until October/November.
The Aussie briefly slipped against the yen, before recovering to last stand at 81.77 yen , but it lost ground against the kiwi dollar, retreating to NZ$1.2996 from a one-week high around NZ$1.3082 set on Friday .
The New Zealand dollar stood at $0.7593, still trapped in a wider $0.7400 and $0.7800 range. It failed to break out of $0.78 last week because of patchy data.
"We would expect to see this range hold this week, though with the euro in the ascendancy, risks are towards the topside," said Westpac senior strategist Imre Speizer.
Kiwi support was still seen around $0.7540, the 100-day moving average, with resistance at the Jan. 20 low of $0.7620.
The market was marking time ahead of the Reserve Bank of New Zealand's first rate review of the year on Thursday, although analysts see no chance of a rise before June while markets are priced for a July hike.
A run of mixed data has done little to raise concerns about inflation, or to enstill hopes for a rapid lift in growth.
Markets have priced in around 68 bps worth of tightening over the next 12 months, up from 57 bps on Friday. It has ranged between 42 and 69 bps over the past month .
The Aussie dollar fell to as low as $0.9864 in the wake of the data showing a mere 0.1 percent quarterly increase in producer prices.
The annual rate was 2.7 percent. Both figures fell short of expectations for a quarterly increase of 0.5 percent and yearly rise of 3.1 percent.
"The latest business inflation result certainly surprised on the lower side of expectations," said Savanth Sebastian, an economist at CommSec.
"And if consumer prices are similarly restrained, then Reserve Bank policymakers will be able to stay on the interest rate sidelines well into the June quarter."
Still, the Aussie traded well within Friday's intraday range, indicating the market had not much conviction. But its repeated failure to reclaim parity meant that pressure was building for the currency to probe lower, traders said.
Last week's trough around $0.9830 was likely to provide first support, before a retest of this month's low around $0.9800. It last traded at $0.9881.
While there is little correlation between the producer price and consumer price reports, Tuesday's CPI data is expected to show underlying inflation running around 2.6 pct for 2010, well within the RBA's 2 to 3 percent target band.
Whatever the outcome though, no one expects the Reserve Bank of Australia to hike rates at its February policy meeting next week. Markets have priced in zero chance of an imminent rate rise and only 34 basis points worth of tightening over the next 12! months .
The interbank futures market isn't fully priced for a 25 bps hike until October/November.
The Aussie briefly slipped against the yen, before recovering to last stand at 81.77 yen , but it lost ground against the kiwi dollar, retreating to NZ$1.2996 from a one-week high around NZ$1.3082 set on Friday .
The New Zealand dollar stood at $0.7593, still trapped in a wider $0.7400 and $0.7800 range. It failed to break out of $0.78 last week because of patchy data.
"We would expect to see this range hold this week, though with the euro in the ascendancy, risks are towards the topside," said Westpac senior strategist Imre Speizer.
Kiwi support was still seen around $0.7540, the 100-day moving average, with resistance at the Jan. 20 low of $0.7620.
The market was marking time ahead of the Reserve Bank of New Zealand's first rate review of the year on Thursday, although analysts see no chance of a rise before June while markets are priced for a July hike.
A run of mixed data has done little to raise concerns about inflation, or to enstill hopes for a rapid lift in growth.
Markets have priced in around 68 bps worth of tightening over the next 12 months, up from 57 bps on Friday. It has ranged between 42 and 69 bps over the past month .
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