Aussie Drops Post RBA; Norway Inflation Buoys Krone
The Australian dollar led losses against the greenback after the nation’s central bank signaled that inflation is moving toward its target, adding fresh momentum to bets for interest-rate cuts. The Norwegian krone drew fresh support from an acceleration in core inflation, backing the central bank’s projections for no monetary policy easing until March.
The Bloomberg Dollar Spot Index inched up 0.1%, nearing a one-week high, while US Treasury yields rose as much as 2 basis points across the curve.
Traders are bracing for US CPI data due Wednesday for clues about the Federal Reserve’s rate path, money-markets are assigning a chance of about 80% for a quarter-point cut by the US central bank on Dec. 18.
AUD/USD fell as much as 0.9% to 0.6380, edging toward its lowest level since August hit last week.
Expectations that the RBA will cut interest rates at its February meeting increased to an almost 70% chance, up from about 50% prior to the policy decision.
“The RBA is still mostly cautious but ‘gaining confidence’ in the inflation outlook,” said Sean Callow, senior FX analyst at Intouch Capital Markets in Singapore. “AUD/USD has now unwound yesterday’s China stimulus-inspired bounce but if China does deliver next year, it should outweigh any careful RBA easing”.
USD/NOK fell as much as 0.3% to 11.0935, while EUR/NOK dropped as much as 0.4% to 11.6932.
Norway posted the first pick-up in monthly core inflation in a year, exceeding analyst expectationsa.
USD/JPY reversed an earlier drop to trade 0.2% up at 151.53.
The Bank of Japan should raise its benchmark interest rate early, and it faces the risk it has already fallen behind the curve, according to a prominent economics professor who was an adviser to the prime minister.
GBP/USD pared an earlier 0.1% drop to trade little changed at 1.2757.
The Bank of England can cut borrowing costs five more times to 3.5% before it runs the risk of overheating the economy and reigniting inflation, according to Bloomberg Economics.
Source : Bloomberg
