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Dollar is close to multi-month high

The greenback remained stable near a 22-month peak on Wednesday as the strength against the euro was offset by small losses against other trading partners.

The ICE Dollar Index, DXY, +0.07% measuring the dollar against a basket of six currencies, was at 97.651, unchanged on the day. The index reached an intraday high at 97.78 on Tuesday, its highest level since June 2017.

The Australian dollar tumbled as much as 1% on Wednesday after the Australian Bureau of Statistics said consumer prices were flat for the first quarter of 2019, below the 0.2% market consensus.

The weaker-than-expected reading has traders pricing in the likelihood the central bank will cut interest rates later this year. Reducing interest rates typically weakens the currency of the central bank involved.

In most recent trade, the Aussie dollar AUDUSD, -0.8731% was at $0.7032, compared to $0.7101 late Tuesday.

 

What are analysts saying?

“The message we got from the latest RBA (Reserve Bank of Australia) policy meeting is that the current policy stance may not be consistent with the Bank’s goals and that a rate cut could be possible in the months to come,” wrote Charalambos Pissouros, senior market analyst at JFD Bank.

“So, having all that in mind, we believe that the overnight inflation data may have prompted market participants to raise more bets with regards to a rate cut in the months to come and that’s why the Aussie fell off the cliff.”

 

Source: MarketWatch