$A lower on inflation figures

The Australian dollar is slightly lower, finding some support despite weaker-than-expected domestic inflation figures.

At 1700 AEDT on Wednesday, the Australian dollar was trading at 105.39 US cents, up from 105.55 cents on Tuesday afternoon.

Commonwealth bank currency strategist Peter Dragicevich said the currency lost ground following the release of consumer price index (CPI) data at 1130 AEDT.

The Australian Bureau of Statistics figures showed the country recorded CPI inflation of 2.2 per cent in the 12 months to December, below economists' expectations of a 2.5 per cent rise.

Mr Dragicevich said while the figures meant the Reserve Bank of Australia had more room to move on interest rates, they did not significantly increase expectations of a rate cut in February.

He said the Australian dollar initially dipped after the CPI figures were released but soon recovered.

"If the RBA's outlook has changed then they may look to ease policy, but at this stage market pricing hasn't really moved for a February rate cut," Mr Dragicevich said.

The RBA, which has a target range for inflation of two to three per cent, will hold its first board meeting of 2013 on February 5.

Mr Dragicevich said the main driver for the Australian dollar on Thursday would be the release of HSBC's flash Purchasing Manager's Index manufacturing data for China for January.

"We're expecting that to lift once again in the month, which will just reiterate that the Chinese economic cycle is gathering further momentum," he said.

"So that should be supportive for the Aussie (dollar)."

At 1700 AEDT, the Australian dollar was trading at 93.07 Japanese yen, down from 94.05 yen on Tuesday and at 79.17 euro cents, up from 79.08 euro cents.

Meanwhile, the weaker inflation figures helped lift Australian bond futures prices higher following the release of the inflation figures.

But Nomura head of fixed income Jon Linton said the rally in bond prices was relatively weak.

"We are about five basis points lower in yield, which is about the minimum you would expect in response to a weak CPI print," he said.

At 1630 AEDT on Wednesday, the March 10-year bond futures contract was trading at 96.730 (implying a yield of 3.270 per cent), up from Tuesday's close of 96.665 (3.335 per cent).

The March three-year bond futures contract was also higher, at 97.280 (2.720 per cent), from 97.230 (2.770 per cent).

Market Data

  • Currencies
    Currencies
    NamePriceChange% Chg
    0.9277-0.001-0.11%
    AUDUSD=X
    0.5525-0.001-0.17%
    AUDGBP=X
    0.6710-0.0011-0.16%
    AUDEUR=X
  • Commodities
    Commodities
    NamePriceChange% Chg