Australian dollar jumps as inflation data sparks talk of a rate hike

The Australian dollar jumped on Wednesday as unexpectedly strong inflation data raised the likelihood of an earlier-than-planned rate hike, while the yen was quiet as Japan's central bank is expected to maintain its loose monetary policy later this week.

This week, Exness Indo said traders are also expecting policy announcements from central banks in Europe and Canada to help understand the outlook for rates amid global supply-side inflationary pressures.

The Australian dollar was last up 0.35% at $0.7525 headline back to a four-month high of $0.7546 hit last week, after data showed , Australian core inflation rose at its fastest annual rate since 2015 in the September quarter, and faster than the Reserve Bank of Australia forecasts.

The data confirmed the markets' view that the RBA is lagging the inflation curve and may have to tighten monetary policy sooner than it has publicly planned.

"A stronger truncated mean print will put some pressure on the RBA to revise its forward guidance on the monetary rate," ANZ analysts wrote in a note.

At the other end of the spectrum, analysts expect the Bank of Japan (BOJ) to show a firm commitment to keeping its monetary settings simple at Thursday's meeting.

The BOJ is expected to lower its economic assessment and markets will bet on no rate hike for the foreseeable future.

The dollar fell slightly to 114.03 yen, but this came after rising 0.37% in the previous session, holding it near the four-year high of 114.695 reached a week ago.

The European Central Bank, which is holding its own policy meeting on Thursday, is also expected to slowly tighten its policy, keeping the euro in check.

The euro was at $1.1601, down 0.4% this week.

However, not all central banks are so far away from policy tightening. Notably, the US Federal Reserve is looming for the markets as they prepare for policymakers to announce next month that they will begin cutting a massive asset purchase programme.

Fed speculation pushed the dollar index, which measures the dollar against a basket of its peers, to a 12-month high of 94.563 earlier this month, but it has since retreated some of those gains. The index last stood at 93.911.

"We think the dollar will fall from here, especially when the Fed really starts tapering off as people start to" sell the fact," said Daniel Lam, senior cross-asset strategist at Standard Chartered Wealth Management.

"It's already happening because people are kind of ahead of the curve," he said.

The Bank of Canada is also due to announce its policy later on Wednesday, and investors expect it to raise its inflation forecast and largely end its pandemic bond-buying programme stimulus, making it the first central bank from a G7 country to do so.

The Canadian dollar has been steady, weakening slightly in recent days as traders worry about investor expectations of the Bank of Canada's will.

Markets are expecting a C$1 billion cut in bond purchases while fully accounting for a rate hike by next April.

"While the market is probably right to expect another CAD 1 billion reduction in the pace of asset purchases, the more delicate issue is the discount rate, and here we think it may be almost impossible for the Bank of Canada to confirm market prices. about the timing of the launch," Michael Xue, an analyst at Deutsche Bank in New York, said in a report.

In cryptocurrency, bitcoin held steady at $60,784, while ether rose 2.4 per cent to $4,222.