Aussie Surges as Receding Rate Cut Odds Halt Kiwi-Parity Push

Australia’s dollar gained against all of its major peers after the country’s inflation was stronger than forecast, easing pressure on the central bank to cut interest rates.

The Aussie moved away from parity with the kiwi dollar after the consumer-price data reduced the odds of a policy change next month by the Reserve Bank of Australia. The yen halted a two-day drop versus the U.S. dollar after Japan reported a trade surplus, the first in three years, that was larger than forecast.

“This inflation number has given some fresh doubts on whether we get a May cut coming through,” supporting the Aussie, said Chris Weston, chief market strategist in Melbourne at IG Australia, a unit of IG Group Holdings Plc. “The balance of probability for a May cut has shifted, given what we’ve seen.”

The Australian dollar jumped as much as 0.9 percent before trading 0.7 percent stronger at 77.64 U.S. cents as of 7:07 a.m. in London. It rose 0.5 percent to NZ$1.0104, from as low as NZ$1.0043. It reached a post-float low of NZ$1.0021 on April 6.

Australia’s consumer price index climbed 0.2 percent from the previous three months, exceeding a 0.1 percent forecast in a Bloomberg survey.

RBA Outlook

“The market had been looking for a below expectations print to bring a May cut back on the table,” National Australia Bank Ltd. analysts led by Sydney-based head of market research Peter Jolly, wrote in a client note. If the central bank keeps borrowing costs steady again next month, investors will start to question the need for further cuts, according to the note.

Swaps traders saw about 60 percent chance that the RBA will lower the cash rate target by a quarter point to a record 2 percent on May 5, compared with 68 percent odds a day earlier, according to data compiled by Bloomberg.

Japan’s trade surplus was 229.3 billion yen ($1.9 billion) in March, the first excess since June 2012, according to the finance ministry. The median forecast in a Bloomberg survey was for a 44.6 billion yen surplus.

The yen rose to an intraday high of 119.45 per dollar after the data, before erasing gains to trade little changed from Tuesday at 119.57.

The Japanese currency’s move against the dollar will be dictated by U.S. data and policy meetings by the Federal Reserve and the Bank of Japan in the coming week, said Kenji Yoshii, a Tokyo-based currency strategist at Mizuho Securities Co.

The BOJ meets on April 30 when it’s due to release its semiannual price and growth outlook. The central bank is considering cutting the inflation forecast for the fiscal year started April 1 to between 0.5 percent and 1 percent from the current 1 percent forecast, the Nikkei newspaper reported.

The Fed meets a day earlier, on April 29, when U.S. first quarter gross domestic product data will also be released.

The Bloomberg Dollar Spot Index, which tracks the currency against 10 major peers, was little changed at 1,191.54, after gaining the past two sessions.

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