Australian dollar hits 9-week low, rounds out a rough month
TLT•The Australian dollar fell 0.3% to $0.6963, its lowest in nine weeks, after August inflation came in below forecasts; it lost 2.8% in September. Markets cut the implied chance of a November rate hike to 20% from 36%.
1. Inflation misses forecasts
Australia’s consumer price index rose 0.4% in August, below the 0.5% forecast, while annual inflation accelerated to 4.0%. Trimmed mean core inflation rose 0.2%, below the 0.3% forecast, and its annual pace held at 3.6% for a third straight month.
2. Rate expectations ease
The inflation data reduced the market-implied chance of another Reserve Bank of Australia rate hike in November to 20%, from 36% before the release. The central bank raised rates to a 15-year high of 4.60% on Tuesday. Capital Economics economist Abhijit Surya said the RBA is likely to remain in wait-and-see mode in the near term.
3. Bonds rebound
Australian three-year debt futures rose 8 ticks to 95.100, while 10-year yields fell 5 basis points to 5.329%. The New Zealand dollar held at $0.5640 after losing 4.7% in September; markets priced in a 70% chance of another New Zealand rate hike in October.
