Australian Dollar Higher After BOJ Keeps Powder Dry

 
   By James Glynn 
 

        SYDNEY--The Australian dollar was higher Wednesday, reflecting weakness in the U.S. dollar after the Bank of Japan failed to announce any new measures to stimulate its economy at a policy meeting.
        The Bank of Japan cut its near-term inflation outlook, but left its key easing policy unchanged, citing brighter economic growth that could eventually help put prices back on a firm upward path.
        A continued slide in oil prices is making it even more difficult for the central bank to achieve its 2% inflation target anytime soon, but the absence of extra easing measures suggests the BOJ remains optimistic that underlying inflation remains in place and the economy could grow faster down the line.
        "There was some market speculation that the BOJ could do something to front run the European Central Bank's likely quantitative easing this week and potentially match the Swiss National Bank's move last week and cut its own deposit rate," said David Forrester, currency strategist at Macquarie Bank, based in Singapore.
        "This speculation was not realized and the U.S. dollar has come under significant downward pressure since the BOJ announcement," he added.
        At 0520 GMT, the Australian dollar was changing hands at US$0.8210, up from US$0.8175 late Tuesday.
        Earlier, news of lower-than-expected inflation in New Zealand also fanned buying of the Australian dollar against the New Zealand dollar.
        New Zealand's consumer price index in the three months ended Dec. 31 rose just 0.8%, the lowest level since the second quarter of 2013, Statistics New Zealand said.
        On the quarter, the index fell 0.2%. Economists had tipped the consumer price index to fall 0.1% on the quarter and rise 0.9% on the year, according to the median of forecasts in a survey by The Wall Street Journal.
        Still, economists said low New Zealand inflation can point to similar outcomes for inflation in Australia. Australian fourth quarter inflation data is due next week.
        Shane Oliver, chief economist at AMP Capital says there is a good chance of a negative inflation result, as Australia reflects the global trend toward deflation. It will make room for a cut in interest rates by the Reserve Bank of Australia, he added.
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        January 21, 2015 00:53 ET (05:53 GMT)

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