domani il grande giorno, alpinn metti la sveglia neh
Aussie dollar falls after soft Q1 producer prices
Monday April 23, 2007, 5:00 pm
By Daniel Morrissey
SYDNEY, April 23 (Reuters) - The Australian dollar nudged lower on Monday after investors trimmed bets that interest rates would rise here as early as next week after domestic data showed surprisingly soft producer prices in the first quarter.
Still, the local currency held above 83 cents and near last week's 17-year peak as financial markets remained convinced that the Reserve Bank of Australia (RBA) would raise rates by a quarter of a percentage point to 6.50 percent later this year.
The strength of the Aussie was a key reason for the flat producer price index in the quarter and a 2.8 percent increase over the year, analysts said. Forecasts had centred on the index rising 0.6 percent in the quarter and 3.5 percent over the year.
"At the margin this increases the chance the Reserve Bank will keep interest rates on hold when they meet next week," said Michael Thomas, senior economist at ICAP.
At 4 p.m. (0600 GMT) the Aussie dollar AUD= was quoted at $0.8343/47 compared with $0.8343/46 here late on Friday, according to Reuters data. It ranged from $0.8342 to $0.8380.
The 30-day interbank futures market 0#YIB: now priced a 44 percent chance the RBA would lift rates at its policy meeting next week, down from a 52 percent risk before the data. But the market priced a 98 percent chance of a rate rise in October.
The Aussie had risen by as much as 9.2 percent since falling to a 16-week low of $0.7682 early last month after investors unwound riskier bets, such as carry trades that involve borrowing the low-yielding yen to invest in high-yielding currencies.
Last week the Aussie reached as high as $0.8390.
"This period of excess demand over supply feels as if it's drawing to a close," said Robert Rennie, chief currency strategist at Westpac.
The Aussie dollar fell back below 99 yen AUDJPY=R on Monday after the cross rate had touched a 15-year peak of 100.04 yen last week.
Japanese investors were not as keen on buying Australian bonds with Aussie/yen close to 100 yen, said Rennie.
A key test for the Aussie dollar will be the strength of the first-quarter consumer price reports on Tuesday. The RBA releases its measures of underlying inflation shortly after the headline consumer price index (CPI) is published at 11:30 a.m. (0130 GMT).
A Reuters poll showed forecasts centred on the RBA's measures rising 0.6 percent in the quarter, which would take the annual rate to 2.8 percent and inside the RBA's 2 to 3 percent target.