Investing.com - The Australian dollar gained smartly in Asia on
Wednesday as underlying consumer prices gained more than expected
in the second quarter.
AUD/USD traded at 0.9432, up 0.40%, after the data.
Australia's second quarter CPI rose 0.5% as expected, but
underlying inflation, the average of trimmed mean and weighted
median inflation that acts as a rough measure the central bank uses
in its cash rate deliberations, rose 0.7%. This placed it on track
for an annual rate at the top end of the Reserve Bank of
Australia's 2% to 3% band.
Also, RBA Deputy Governor Philip Lowe said the country has
shifted its foreign currency portfolio towards the Chinese yuan
(renminbi) and currently has around 3% invested in that
Overnight, the dollar traded largely higher against most major
currencies after investors digested solid U.S. inflation and
existing home sales numbers and determined the U.S. economy
continues to improve and is in need of less support from the
The Labor Department reported earlier that the U.S. consumer
price index rose 2.1% in June, unchanged from the previous month
and in line with forecasts, which drew applause for the dollar.
On a month-over-month basis, U.S. consumer prices were up 0.3%
after a 0.4% increase in May, also in line with expectations.
Figures that met but did not exceed Wall Street expectations
bolstered the dollar, as a strong upside surprise could have
rattled nerves and sent many investors rethinking what the Federal
Reserve will do with monetary policy, thus creating
Market talk points to the Fed ending its bond-buying program
around October and then raising interest rates some time in 2015,
though the length of time that will pass between those two policy
moves remains up in the air.
June's core inflation rate, which excludes food and energy
costs, rose by just 0.1% from May and 1.9% on year, slightly below
market calls for 0.2% and 2.0% readings, respectively, which
illustrated how gasoline was driving the CPI up, though markets
viewed the numbers as fundamentally healthy anyway.
Elsewhere, the National Association of Realtors reported earlier
that existing U.S. home sales rose 2.6% to 5.04 million units in
June from 4.91 million in May, beating market forecasts for a 2.0%
rise to 4.97 million units.
The US Dollar Index, which tracks the performance of the
greenback versus a basket of six other major currencies, was flat
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