Australia’s dollar strengthened to the highest in almost two weeks after a government report showed annual inflation accelerated to the fastest pace in four years.
The Aussie rose at least 0.3 percent versus all its 16 major peers as traders pared bets the Reserve Bank of Australia will cut interest rates in the next year. The euro fell to an eight-month low against the dollar before a report tomorrow that economists said will show the region’s manufacturing is slowing. Indonesia’s rupiah jumped the most in two weeks after Joko Widodo was named as the nation’s next president. A gauge of foreign-exchange volatility gained by the most in a month.
“For a market that has been leaning heavily toward another rate cut from the RBA, they were vulnerable to any upside surprise on inflation,” said Sean Callow, a strategist at Westpac Banking Corp. in Sydney. “Inflation is very muted globally and it wouldn’t have been a great surprise if Australia had a softish reading either, so when we didn’t get that, then you got the knee-jerk response on the Aussie.”
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