SYDNEY, May 13 (Reuters) - The Australian and New Zealand
dollars sank to one-week lows on Thursday against their U.S.
counterpart, which was buoyed by expectations of
earlier-than-expected policy tightening by the Federal Reserve
in response to rapid inflation.
U.S. consumer prices increased by the most in nearly 12
years in April as booming demand amid a reopening economy pushed
against supply constraints, data showed on Wednesday.
Traders now await U.S. weekly jobless claims data due later
in the day and retail sales numbers on Friday to determine
whether consumer prices will continue to rise.
The Australian dollar, a liquid gauge of risk, was
last at $0.7727, after touching its lowest level since May 6 of
$0.7718 earlier in the session. It had slid 1.5% on Wednesday
when the U.S. inflation data was released.
In Australia, inflation is expected to stay under the
central bank's 2-3% target band for a long time to come, despite
solid economic recovery.
The Reserve Bank of Australia (RBA), last week, emphasised
the economy was well short of full employment and wage growth is
just too slow. Annual wages growth in Australia is at a record
low of 1.25%, compared with 2% for Europe and nearly 3% in the
The RBA has said it would not increase the cash rate from
the current record low of 0.1% until inflation was sustainably
within its target band.
The New Zealand dollar hit a one-week trough of
$0.7152 before nudging up a bit to $0.7171.
The kiwi was supported by hopes that the country would
re-open its economy, after Prime Minister Jacinda Ardern said
she is exploring quarantine-free travel with other countries.
Analysts said volatility in risk assets was here to stay.
"Markets were already expecting a rise in inflation the
big question is how sticky that inflation is. That has not been
answered today, nor will it be answered for several months,"
said Seema Shah, chief strategist at Principal Global Investors,
referring to the U.S. data.
"Nonetheless, risk markets will continue to be whipsawed by
inflationary concerns over the coming months and investors would
be wise to introduce some inflation protection into their
New Zealand government bonds slipped in line with
U.S. Treasuries, sending yields 4 basis points higher.
Australian government bond futures fell too, with the
three-year bond contract down 1 tick at 99.745. The
10-year contract eased 3 ticks to 98.2500.
(Editing by Rashmi Aich)