Aussie Rises to 12-Week High Versus Yen on Core Inflation Data; Kiwi Falls

Australia’s dollar climbed to a 12- week high against the yen on speculation the nation’s Reserve Bank may have less scope to cut borrowing costs after a measure of core inflation accelerated more than forecast.

The so-called Aussie advanced versus the dollar, trading 0.6 percent from its strongest level in more than two months, even as headline consumer-price inflation stalled in the quarter ended in December. New Zealand’s currency slid against all of its major peers before a central bank meeting tomorrow, with policy makers predicted to hold the country’s benchmark lending rate at a record low.

“The inflation pulse in Australia is a little bit firmer than what the market expected,” said Jonathan Cavenagh, a currency strategist at Westpac Banking Corp. in Singapore. “At the margin, we’ll see it reduce the likelihood of more aggressive RBA rate cuts. That’s why we’re seeing the Aussie rally.”

Australia’s dollar climbed 0.5 percent to 81.89 yen at 4:05 p.m. in Sydney after earlier advancing to 82.09, the highest level since Nov. 1. The Aussie rose 0.2 percent to $1.0514. It strengthened to $1.0573 on Jan. 23, the strongest since Oct. 31. New Zealand’s dollar dropped 0.3 percent to 80.93 U.S. cents. It was little changed at 63.04 yen.

Australian bonds fell, pushing the yield on benchmark 10- year securities up by nine basis points, or 0.09 percentage point, to 3.98 percent. New Zealand’s two-year swap rate, a fixed payment made to receive floating rates, gained four basis points to 2.86 percent.

Australian Inflation

Consumer prices were unchanged in the fourth quarter compared with the previous three-month period, the Bureau of Statistics said in Sydney today. That was weaker than the 0.2 percent gain that was the median estimate in a Bloomberg News survey of economists. The so-called trimmed mean, one of the central bank’s measures of underlying inflation, advanced 0.6 percent, compared with a forecast 0.5 percent increase.

Treasurer Wayne Swan said the nation’s underlying inflation is “well contained” within the RBA’s target band. He spoke at a press conference broadcast on Sky News.

Traders see a 52 percent chance that the RBA will lower its benchmark interest rate by 25 basis points when officials meet on Feb. 7, cash rate futures indicate. The futures yesterday signaled a 64 percent chance of a cut. Australia’s key rate is currently at 4.25 percent after back-to-back reductions at the central bank’s last two meetings.

RBNZ Meeting

New Zealand’s dollar halted a three-day advance as economists in another Bloomberg poll predict the Reserve Bank of New Zealand will keep borrowing costs unchanged at 2.5 percent before officials meet tomorrow.

“I think they’re going to try and leave rates steady,” said Thomas Averill, managing director in Sydney at Rochford Capital, a currency and interest-rate risk-management company. “There’ll be a little bit of concern that if they cut too early and if things really do go dire, they haven’t got scope for further cutting.”

Declines in the so-called kiwi were limited after separate reports today showed the nation’s manufacturing advanced and card spending climbed last month.

To contact the reporter on this story: Kristine Aquino in Singapore at kaquino1@bloomberg.net

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net

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