Dollar falls as rates, Japan eyed

The local unit has lost ground as inflation data adds to RBA pressure, while Japan eyes fresh stimulus.

The Australian dollar has slipped against the greenback, as the market continues to digest the morning’s inflation data, while reports of an imminent Japanese fiscal stimulus package drove the yen sharply higher.

At 1.15pm (AEST) the local unit was trading at US74.69 cents, down from US75.01c on Tuesday.

It had priced firmly above US75c prior to the release of the ABS’s June quarter inflation print, which showed consumer prices rose by 0.4 per cent from the prior quarter, largely in line with expectations.

That put inflation 1 per cent higher over the year to June 30, marking the lowest growth since 1999 and heaping pressure on the Reserve Bank’s inflation target.

“The data placing huge pressure on the RBA to cut rates next Tuesday,” Altair markets analyst Tristan K’Nell said.

“There is an increasing risk that we may not be able to move anywhere near the inflation target given pressure from a lack of wage growth, over supply of rental properties and … low or falling prices for a wide range of goods imported from China in to Australia.”

Meanwhile, news reports out of Japan suggested that Prime Minister Shizo Abe planned to announce an economic stimulus package worth as much as 27 trillion yen on Wednesday afternoon.

It would be the largest stimulus measure in the country’s history.

The yen was called sharply higher as investors positioned for an announcement, trading at $US1.0623 at 1.15pm (AEST), up from $US1.0463 on Tuesday.