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Dollar rises on inflation data

Jul 24, 2014

The Australian dollar is at a three-week high following higher-than-expected inflation figures.

Early on Thursday, the local currency was trading at 94.55 US cents, up from 94.40 cents on Wednesday.

The Australian dollar has rallied as high as 94.63 US cents after underlying inflation came in at 2.8 per cent, towards the top of the Reserve Bank’s two to three per cent target band.

That reduced the likelihood that the Reserve Bank of Australia will cut rates any time in the near future, although most economists expect rates to remain on hold until at least the end of 2014.

“In a world of uncertainty about central bank direction, as markets do not like to price on hold for too long, inflation data becomes very important,” National Australia Bank senior currency strategist Emma Lawson said.

“We have looked at the behaviour of the Australian dollar to data releases, and in the last year, this CPI release has elicited the greatest Australian dollar movement of all the important releases, on the day of the data.”

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