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Dollar rises on US inflation

 

online dollarThe Australian dollar is back above 86 US cents after flat American inflation figures made traders rethink a US rate rise.

At 0700 AEDT on Friday, the local currency was trading at 86.35 US cents, up from 85.93 cents on Thursday.

The unit had sunk to the lowest point since July 2010 during offshore trade.

But it rose above 86 US cents after the US consumer price index was revealed to be unchanged in October.

OM Financial senior client adviser for foreign exchange, Stuart Ive, said the low American inflation figures weakened the greenback, as traders reassessed the prospect of a US rate rise in 2015.

“The markets are very wary that if we do start seeing those inflation figures continue to fall, the likelihood of rate raises in … the first or second quarter, in the US becomes less of a reality,” he said from Wellington.

American headline inflation is expanding at a modest annual pace of 1.7 per cent, which is below the US Federal Reserve’s two per cent target.

When the two volatile components of the consumer price index, food and energy, were removed, underlying inflation rose by just 0.2 per cent in October for an annual increase of 1.8 per cent.

AAP

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