The Australian dollar climbed to its highest level in a week against the US dollar during the Asian trading session on Wednesday, after the nation’s inflation data for the fourth-quarter accelerated higher than expected.
The aussie added 0.59% to $0.8859 against the US dollar at the time of writing, while the Consumer-price inflation advanced 0.8% higher in the fourth quarter.
The Consumer Price Index (CPI) rose 2.7% higher, rising above analysts forecast of a 2.4% increase. Investors reduced their expectations that the Reserve Bank of Australia Governor Glenn Stevens will cut the record-low 2.5% benchmark rate further and lower borrowing costs at its next meeting scheduled for February 4.
According to the statement from the last monetary policy meeting, RBA Governor Glenn Stevens said the bank is committed to rebalancing growth in the manufacturing, construction, retail and residential sectors. The central bank’s target for inflation is between 2% and 3% on average.
“The Australian dollar, while below its level earlier in the year, is still uncomfortably high. A lower level of the exchange rate is likely to be needed to achieve balanced growth in the economy,” Stevens said on December 3.
The aussie currency dropped to its lowest level in nearly four years on Monday, when dropped $0.8756; following reports which revealed the country lost approximately 22,600 in December.
Australian Dollar – IMF Growth Outlook
The global economy will expand by 3.7% in 2014, slightly faster compared with October forecasts of 3.6%, according to the IMF latest World Economic Outlook (WEO). Market participants are speculating this could persuade the central bank to end its stimulus program this year.
“financial conditions in advanced economies have eased since the release of the October 2013 WEO – with little change since the announcement by the US Federal Reserve on December 18 that it will begin tapering its quantitative easing measures this month,” according to the report released.
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