Dollar higher despite CPI figures

THE Australian dollar has maintained a strong position after weaker-than-expected inflation data which could clear the way for a rate cut.

THE Australian dollar has maintained a strong position after weaker-than-expected inflation data which could clear the way for a Reserve Bank of Australia (RBA) rate cut.

At 12pm AEDT today, the Australian dollar was at 105.56 US cents, virtually unchanged from yesterday's close of 105.55 US cents.

Since 7am AEDT, it has traded between 105.42 and 105.75 US cents.

National Australia Bank co-head of foreign exchange strategy Ray Attrill said the currency remained strong despite the consumer price index (CPI) data, released at 11.30am AEDT.

"It's quite surprising that the Aussie dollar hasn't fallen notably," he said. "Our view is that all of the CPI readings show that the RBA meeting next month is very much a live one in terms of the possibility of a rate cut."

"We think there's at least a 50 per cent chance that they will decide to cut rates."

The CPI - a key measure of inflation - rose 0.2 per cent in the December quarter, the Australian Bureau of Statistics said today. This was lower than the expectation of a 0.5 per cent rise.

Mr Attrill said that with little else to move the local currency, the Australian dollar would likely remain within a 105 to 106 US cent range until the RBA meeting on February 5.

Meanwhile, Australian bond futures prices were stronger. At 12pm today, the March 10-year bond futures contract was trading at 96.695 (implying a yield of 3.305 per cent), up from yesterday's close of 96.665 (3.335 per cent). The March three-year bond futures contract was also higher, at 97.260 (implying a yield of 2.740 per cent), up from 97.230 (2.770 per cent).