The Australian dollar bounced from a one-month low on Tuesday, underpinned by rising commodity prices, and as a prediction of rising inflation from the country's central bank implied further interest rate cuts were off the agenda for now. The Australian dollar rose as high as $0.7582, after the Reserve Bank of Australia (RBA) released minutes of its November policy meeting in which it once again gave an upbeat assessment of the economy. It touched $0.7524 on Monday, the lowest since October 13, but has now steadied around $0.7556.
Elsewhere, the Aussie was slightly firmer against its New Zealand cousin, but fell against the euro and the yen. The New Zealand dollar stood at $0.7114, rising from a one-month low of $0.7070 touched on Monday. New Zealand was still reeling from the impact of several powerful earthquakes, with transport links in the south island most heavily hit.
New Zealand government bonds eased, sending yields about 2 basis higher at the longer end of the curve. Australian government bond futures slipped, with the three-year bond contract down 2 ticks at 98.160. The 10-year contract edged half a tick lower to 97.37. "There is a clear change in the Reserve Bank's attitude to inflation. Admittedly, it is not flashing warning signs," Craig James, chief economist at CommSec.
"Simply, interest rate settings are likely to remain stable until well into 2017." RBA Governor Philip Lowe speaks in Melbourne later in the day and economists were keen to hear his views on whether US President-elect Donald Trump's election promises would actually lift inflation and interest rates in the world's largest economy.
The Aussie has fallen 2.5 percent since Trump won the election last week, as investors sent the greenback and bond yields soaring. "We are particularly interested to see the RBA's take on a post-Trump world in future meetings and speeches, now that the reflation trade is back," said Matt Simpson, Melbourne-based senior analyst at ThinkMarkets.