Aussie Plunges the Most in Three Months as April Inflation Lags Expectations

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Aussie Plunges the Most in Three Months as April Inflation Lags ExpectationsThe Australian dollar fell the steepest in three months versus the greenback as market absorbed a government report that indicated that core inflation lagged economists’ expectations, lowering the possibility of an interest rate hike.

The Aussie also fell more than 0.5 percent against all 16 peers after separate report showed China manufacturing shrunk. China is Australia’s biggest trading partner.

The Australian currency fell 1 percent to trade at 92.76 U.S. cents in early morning trade in London, its steepest fall since January 24. It also hit a two-week low of 92.71 cents. The U.S. dollar remained slightly unchanged at $1.3819 a euro and plunged 0.1 percent to 102.53 yen. The euro held steady at 141.69 yen.

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The Bloomberg Dollar Spot Index, which monitors the dollar against 10 advanced-economy peers, advanced 0.1 percent to 1,011.73, after earlier touching a two-week high of 1,012.09.

“The soft CPI print has probably put paid to any hopes for a mid-year rally for the Aussie dollar,” Geoffrey Yu, a London-based senior currency strategist at UBS AG told Bloomberg. “Although the domestic outlook is broadly favorable, the Reserve Bank of Australia is unlikely to change its bias in the foreseeable future.”

The Australian statistics bureau reported that the revised consumer prices index was 2.6 percent last quarter from a year earlier. This equalled the figure set in the quarter ending December and was lower than the mean estimate of 2.9 percent in a Bloomberg poll.

The Aussie also fell after Markit Economics and HSBC Holdings announced that the Chinese manufacturing gauge, which is computed based on purchasing managers responses, stood at 48.3 in April from 48 in March. The figure has stood under 50, which shows contraction, over the last four months. To register for a free 2-week subscription to ForexMinute Premium Plan, visit www.forexminute.com/newsletter.

To contact the reporter of this story; Jonathan Millet at john@forexminute.com