Australian Dollar Tripped Up by New Zealand Data

 
   By James Glynn 
 

        SYDNEY--The Australian dollar fell sharply Tuesday on data showing easing inflation expectations in New Zealand, where such trends are often viewed as a leading indicator for price pressures in Australia.
        At 0350 GMT, the Australian dollar was changing hands at US$0.7775, down from US$0.7830 late Monday.
        New Zealand first quarter inflation expectations eased, according to a Reserve Bank of New Zealand survey.
        Expectations for consumer-price gains for the next 12 months declined to 1.11% from 1.59% in the fourth quarter, the survey conducted for the central bank by The Nielsen Co. showed.
        "It did look as though the Australian dollar got caught in the backwash from the New Zealand dollar fall, so yes I would say there was collateral damage," said Ray Attrill global head of currency with National Australia Bank.
        Greg Gibbs, currency strategist at RBS said the Australian dollar "was dragged down by association."
        Daniel Been, currency strategist at ANZ, said "it is the case that the two do move together relatively closely."
        Still, the report only marginally adds to the case for a further interest rate cut in Australia, Mr. Been added.
        "I think the Reserve Bank of Australia cycle is more about growth than inflation this time, he said, adding that further indications of soft inflation "would not be a pre-requisite for further easing."
        The Reserve Bank of Australia cut its cash rate target to a record low 2.25% from 2.50% at the start of February, warning growth was too weak to prevent unemployment rising further this year.
        With U.S. Federal Reserve chairman Janet Yellen scheduled to speak to Congress later Tuesday, currency markets globally are expected to quiet.
        "We're seeing traders jostle for position ahead of Janet Yellen's testimony to the US Congress," said Stephen Innes, senior trader at OANDA.
        "Any hint of dovishness in her comments will be extremely bad for those holding long positions on the U.S. dollar," Innes said. On the other hand if she hints at a possible rate hike "the U.S. dollar could soar."
        -Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        February 23, 2015 23:08 ET (04:08 GMT)

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