The Australian dollar breached yet another post-float high and is marching towards 110 US cents after stronger than expected inflation data.
The local unit hit 108.51 on Wednesday, its highest level since the currency was floated in December 1983.
At 1700 AEST, the local unit was trading at 108.20 US cents, up from 107.57 cents on Thursday, its last local session close before the five-day Easter and Anzac Day weekend. Its low point since 0700 AEST on Wednesday, was 107.75 US cents. During the local session, the Australian Bureau of Statistics (ABS) reported the Consumer Price Index (CPI) rose by 1.6 per cent in the March quarter for an annual inflation rate of 3.3 per cent. Economists' forecasts for the CPI centred on a rise of 1.2 per cent for the quarter for a 3.0 per cent annual pace. St George chief economist Besa Deda said the local unit was given a boost following the stronger than expected inflation numbers. "It's had a bit of a lift today ... particularly with evidence that underlying inflation has passed its low point," Ms Deda said.
The Federal Open Markets Committee of the US Federal Reserve is due to issue its monthly policy announcement overnight, which will be followed by the inaugural quarterly press conference from Fed chairman Ben Bernanke.
Currency traders would be keeping a close eye on the announcement and Dr Bernanke's press conference, Ms Deda said.
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She said the Australia dollar looked to be well supported in the near term and could test 111 US cents.
"I think there is some risk that after the Fed meeting, we might get a bit of a dead cat bounce for the US dollar just because the US dollar has been weakening considerably leading in to the meeting.
"But don't think there will be any big surprises in the meeting and ultimately the US dollar should resume its trend higher."
Ms Deda expected the domestic currency to trade between 106.80 US cents and 110 US cents overnight.
At 1700 AEST, the Australian dollar was at 88.53 Japanese yen, up from Thursday's close of 88.24 yen, and at 73.80 euro cents, up from 73.61 euro cents previously.
The euro finished at 1.4662 US dollars, up from 1.4615 US dollars, and at 120.00 yen, up from 119.87 yen previously.
The US dollar was at 81.86 yen, down from 82.03 yen on Wednesday. Meanwhile, the Australian bond market was mixed.
At 1630 AEST, the June 10-year bond futures contract was trading at 94.535 (implying a yield of 5.465 per cent), up from 94.480 (5.520 per cent) on Thursday last week when the local market last traded before the Easter/Anzac Day long weekend.
The June three-year bond futures contract was at 94.860 (5.140 per cent), down slightly from 94.870 (5.130 per cent) previously. RBC Capital Markets fixed income strategist Michael Turner said the bond market sold off shortly after the CPI figures were released.
The higher than expected inflation numbers suggested the Reserve Bank of Australia (RBA) may soon need to raise the cash rate, he said.
The 90-day bank bills on Wednesday were at 4.900 per cent, up from 4.850 per cent on Thursday last week and the 180-day bank bills were 5.010 per cent up from 5.000 per cent previously.
The Reserve Bank of Australia's trade weighted index (TWI) was at 78.7, its highest level since February 4 1985. On Thursday it was 78.4.
