SINGAPORE- The dollar drew support on Wednesday from a survey showing US business pulling out of a five month contraction, while the Australian dollar strengthened on the likelihood of interest rate hikes after a surprisingly strong inflation print.
The dollar index which measures the greenback against a basket of six peers, was steady at 106.17, rebounding from a one-month low of 105.35 struck during the previous session.
S&P Global on Tuesday said its flash US Composite Purchasing Managers Index, tracking both the manufacturing and service sectors, rose to its highest level since July, potentially giving the US Federal Reserve more room to keep interest rates high.
The buoyant dollar kept the yen pinned near the closely watched 150 threshold, with the Japanese currency last at 149.84 per dollar, having mostly traded sideways over the past month and keeping traders on their toes for any signs of intervention by Japanese authorities.
Pressure is mounting on the Bank of Japan to change its bond yield control as global interest rates rise. A hike to an existing yield cap set just three months ago is being discussed as a possibility in the run up to next week’s policy meeting, sources said earlier this week.
The Aussie gained as much as 0.7 percent to touch a roughly two-week high of $0.6400 on Wednesday after data showed the country’s consumer price index rising 1.2 percent in the third quarter, above market forecasts of 1.1 percent and up from a 0.8 percent increase the previous quarter.
That left traders narrowing the odds on a possible rate increase by the Reserve Bank of Australia (RBA) next month, which would come after four rate pauses.
“The RBA’s November meeting is likely to be live, and the cash rate to be hiked to 4.35 percent . And I suspect it will be a hawkish hike,” said Matt Simpson, senior market analyst at City Index.
In the broader market, the US dollar held to most of its gains against the euro, after the single currency slid 0.75 percent in the previous session on data which showed the euro zone’s business activity took a surprise turn for the worse this month.