The Australian dollar and kiwi held on to recent gains near multi-week highs on Thursday in line with investors’ recent shift towards riskier assets like equities, but currencies This was little changed ahead of US inflation data later in the day. This data could provide fresh clues to traders about the pace of Federal Reserve monetary tightening, with higher-than-expected consumer prices likely to signal strong demand for rate hikes. stronger. The Australian dollar was last at $0.7174, not far from $0.7194 reached the previous day, near a three-week high.
Aluminum prices hit a 13-and-a-half-year high on Wednesday and other industrial metals also rose. The New Zealand dollar, hit a two-week high of $0.66975 on Wednesday, at $0.6682. The improved risk sentiment also weighed on the safe-haven yen, at 115.61 against the dollar, testing the lows of its recent range. The dollar index remains steady at 95.561, little changed this week, after two volatile weeks. “January CPI is the only event likely to push (dollar) outside of its tight trading range this week,” ABC analysts said in a note. Economists polled by Reuters expect growth of 0.5% month-on-month in January and 7.3% year-on-year.
Westpac analysts in a morning note to clients pointed to a “higher flare in metals markets, increased global risk sentiment and a weaker US dollar” as supportive factors. Aussie support, adding “a close above $0.7183 would suggest further expansion towards $0.7225 and possibly $0.7275.” The MSCI World Index is up about 2% this week. after a dismal January, supported by a string of upbeat earnings and some positive headlines suggesting tensions between the West and Russia over Ukraine may subside.
With the Federal Reserve worried about high inflation, investors are wondering if a rise in the CPI could push the index faster and harder with policy tightening. Markets are expecting a 25 basis point (bps) rate hike from the Fed at its March meeting, with some pointing to the possibility of a 50 bps hike. Cleveland Federal Reserve President Loretta Mester said on Wednesday that she does not see a compelling case for starting with a 50 basis point increase, the rate hike after March will depend on the level of inflation growth and its degree of regulation or existence.
Yields on U.S. and European government bonds rose as interest rate hike expectations grew, but softened Wednesday and Thursday morning. The benchmark US 10-year yield was last seen at 1,9285%, down slightly from Tuesday’s 1.970%, a 27-month high. The euro at 1.1423, edged lower this week after ECB President Christine Lagarde said on Monday there was no need to tighten policy, easing fears of rallies this year. The British pound was steady at $1,353. In the crypto world, bitcoin is slightly more stable at $44,200, just below its five-week high on Tuesday.
- Australian markets maintain recent gains as the world awaits US inflation data.
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