FOREX-Aussie jumps, kiwi slumps after inflation data

Reuters

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    By Rae Wee
       SINGAPORE, Jan 25 (Reuters) - The Australian dollar
jumped to a more than five-month high on Wednesday after
inflation data came in hotter than expected, while the kiwi
slipped after New Zealand's fourth-quarter inflation rose less
than what its central bank had forecast.
    The euro held near a nine-month peak against the dollar, as
traders weighed a rosier growth outlook for the euro zone
sagainst growing signs of a looming U.S. recession.
    The Aussie  AUD=D3  rose 0.66% to $0.7092, its highest since
August, after a shock surge in inflation to a 33-year high last
quarter added to the case for the Reserve Bank of Australia to
continue raising interest rates.
    Meanwhile, the kiwi  NZD=D3  slid nearly 0.6% to $0.6469,
after New Zealand's annual inflation of 7.2% in the fourth
quarter came in below its central bank's 7.5% forecast.
    "The main message we're taking from it is that we think
we've seen the worst of inflation now, and we think inflation
has peaked," said Jarrod Kerr, chief economist at Kiwibank.
    "We're expecting the cash rate in New Zealand to peak at 5%,
not 5.5%, which is what the Reserve Bank (of New Zealand) is
telling us they're going to do, and rates markets are reacting
to that change in view."
    In other currencies, the euro  EUR=EBS  steadied at $1.0888,
near Monday's nine-month high of $1.0927, as a surprisingly
resilient euro zone economy and hawkish rhetoric from European
Central Bank (ECB) policymakers supported the single currency.
    Data on Tuesday showed that euro zone business activity made
a surprise return to modest growth in January, indicating the
downturn in the bloc may not be as deep as feared.
    Expectations of further rate increases from the ECB also
aided sentiment. Policymakers are committed to taming inflation,
but are split on the size of moves beyond February's likely
half-a-percentage point increase.  0#ECBWATCH 
    In the United States, a gloomier outlook is unfolding as
signs of an economic slowdown, a result of the Federal Reserve's
aggressive rate hikes last year, are starting to show.
    U.S. business activity contracted for the seventh straight
month in January, though the downturn moderated across both the
manufacturing and services sectors for the first time since
September.
    Against a basket of currencies, the U.S. dollar index  =USD 
eked out a 0.01% gain to 101.92, not far from last week's nearly
eight-month low of 101.51.
    "(The data) just confirms that for one, the resilience in
Europe ... and the challenges they've had in terms of energy,
have not been as detrimental as some had expected, whilst at the
same time, the slowdown in the U.S., in terms of activity, looks
to be broadening," said Rodrigo Catril, a currency strategist at
National Australia Bank.
    Sterling  GBP=D3  slipped 0.15% to $1.2322, while the
Japanese yen  JPY=EBS  last bought 130.24 per dollar. 
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World FX rates    https://tmsnrt.rs/2RBWI5E
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 (Reporting by Rae Wee; Editing by Himani Sarkar)
 ((Rae.Wee@thomsonreuters.com;))

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