Australian, NZ dollars rise as greenback falters on inflation doubts

[SYDNEY] The Australian and New Zealand dollars rose on Thursday as the greenback stumbled to two-week lows after minutes of the US Federal Reserve meeting showed many officials expressed concerns that soft inflation might not be transitory.

The worries about stubbornly weak consumer prices put a question mark over the pace of future rate increases in the world's biggest economy.

That led to some selling pressure in the dollar and sent its Australian counterpart to a one-week top of US$0.7813. The Aussie has risen 0.5 per cent so far this week, after four straight weekly losses.

The New Zealand dollar climbed for a third straight session to a high of US$0.7110, but was still within spitting distance of a more than four-month trough touched this week.

"Inglorious uncertainty has set in over the course of the Federal Reserve Board path to interest rate normalisation," said Stephen Innes, head of trading for Asia-Pacific at Oanda.

"Given the uncertainties of Fed pricing and an arguably dovish FOMC minutes, it should underpin sentiment in the Australian Dollar." The dollar index, which measures the greenback's value against a basket of six major currencies, slipped to as low as 92.839 on Thursday, its lowest since Sept 26.

Investors will closely watch US producer price data on Thursday and consumer price figures on Friday, after the US jobs figures last week showed a rise in wages that boosted expectations that inflation is increasing.

The market is pricing in around a 77 per cent chance of a US rate hike in December.

In New Zealand, investors were still in the dark about who will form the new government, almost three weeks after the Sept 23 general election in which no party won a majority.

The leader of the nationalist New Zealand First Party holding the balance of power, Winston Peters, said on Thursday he would need more time to make a final decision.

Mr Peters was in separate talks with both the ruling National and the opposition Labour parties to form a coalition, although he remained cagey about expressing allegiance to either of them.

New Zealand government bonds were a touch firmer, sending yields about 1 basis points lower across the curve.

Australian government bond futures were mostly unchanged, with the three-year bond contract flat at 97.840 and the 10-year contract down half a tick at 97.1500.

REUTERS