Australian, NZ dollars tick higher, US dollar capped as Trump withholds detail

[SYDNEY] The Australian dollar stayed near a 2-1/2-month peak on Monday while the US dollar was on the back foot after US President Donald Trump offered no detail on his plans to stimulate economic growth.

The Australian dollar stood at US$0.7572, within kissing distance of last week's high of US$0.7589, a level not seen since Nov 11.

The Aussie posted its fourth straight weekly gain last week and is up more than 5 per cent so far in January, making it one of the best-performing major currencies this year.

That is a marked turnaround from late December when it hit a seven-month trough of US$0.7160 as the US dollar rode high on wagers that Trump's policies would stoke US inflation.

That reflation trade seems to have faltered because Mr Trump has since winning the Nov 8 election held back any details of his economic policies.

Investors had been looking to Mr Trump to highlight his plans for fiscal spending, tax cuts and regulatory reforms in Friday's inaugural speech. He focused instead on "America first" campaign catchphrases. "In our view, the USD's upside is limited to the peak reached in late December until a confirmation of the new US government's inflationary economic policies is received," said Joseph Capurso, senior currency strategist at CBA.

In Australia investors will be waiting for fourth quarter inflation data on Wednesday for further clues. Analysts generally believe CPI picked up a little, but core inflation remained around a record low of 1.5 per cent for a second straight quarter.

The Aussie slipped 0.3 per cent on its New Zealand cousin but stayed near a two-month high.

The New Zealand dollar rose 0.5 per cent to US$0.7200, not too far from a more than one-month high of US$0.7225 touched last week. The kiwi is up 3.7 per cent in January, on track for its best monthly performance since last June.

New Zealand publishes fourth-quarter inflation data this week, with the annual figure seen jumping to 1.2 per cent, a Reuters poll found.

"The Reserve Bank of New Zealand will undoubtedly be relieved to see inflation back within the 1-2 per cent target band," ASB Economics said in a note. "However, with inflation only just within the band and recent NZD strength suggesting further downward pressure on tradable inflation to come, we don't think the RBNZ will be counting its chickens just yet." New Zealand government bonds were little changed.

Australian government bond futures rose, with the three-year bond contract up 2 ticks at 97.96. The 10-year contract climbed 3 ticks to 97.215.

REUTERS