The Australian dollar has risen Thursday, buying 69.04 US cents from 68.62 US cents on Wednesday.
Yesterday, the local currency crept higher after data on domestic inflation proved no softer than expected, leading investors to price out almost any chance of a cut in interest rates next week.
The Aussie edged up to 68.62 US cents on Wednesday and away from a recent trough of 68.10 US cents.
While official figures confirmed inflation remained subdued, there had been speculation it would be even weaker and so revive the risk of a short-term policy easing.
Instead, the outcome was much as forecast with consumer prices rising 1.7 per cent in the year to September and a closely watched underlying measure up 1.6 per cent.
Both are well below the Reserve Bank of Australia’s long-term target band of 2-3 per cent, a key reason it has already cut rates three times this year to a record low of 0.75 per cent.
The lack of downside surprise in the latest quarter left the futures market paring back the chance of a cut at the RBA’s November 5 meeting to just 4.0 per cent and a move in December to 30 per cent.
Pricing for a February move has also been scaled back in recent days and now stands at 56 per cent and the market currently sees no chance of rates going under 0.5 per cent.
The need for a move will be determined in part by what the Federal Reserve does with US rates, since the RBA might be forced to act just to prevent an export-sapping increase in the Aussie dollar.
The Fed is widely expected to ease later on Wednesday but investors are less certain if that will be the last one.
Any signal the Fed is done, would lessen the need for another RBA move and would tend to push up local bond yields.
Yields on three-year paper have already drifted up to 0.80 per cent, having hit an historic low of 0.60 per cent early in the month while 10-year bonds paid 1.147 per cent.
The three-year bond futures contract was 2 ticks firmer on the day at 99.210, while the 10-year contract rose 4 ticks to 95.8550.