Reuters Australia
Aussie dollar slips as U.S. woes ease, bonds fall
Thursday July 17, 11:49 AM
SYDNEY, July 17 (Reuters) - The Australian dollar was softer against a recovering U.S. dollar on Thursday, after surprisingly strong earnings from Wells Fargo & Co. somewhat soothed the worries about the stability of the U.S. financial sector.
* The Aussie was also on the defensive after commodities fell sharply and on market talk that the Australian central bank could consider cutting interest rates in the coming months as slowing demand pulls down inflation from current 17-year highs.
* Reserve Bank of Australia (RBA) Governor Glenn Stevens in a speech on Wednesday indicated rates had probably peaked. Financial markets are pricing in a 40 percent chance of a rate cut in the next 12 months, but analysts are more cautious, noting Stevens also pointed to the booming terms of trade which could provide a huge boost to the economy.
* By 9:20 a.m. (2320 GMT), the Aussie AUD= was at $0.9742/47 against the U.S. dollar, down from $0.9776/81 late here on Wednesday. It struck a 25-year high of $0.9851 earlier this week on the back of high commodity prices and widening rate differentials over the United States.
* But the U.S. dollar rebounded offshore after minutes from the Federal Reserve's June meeting showed some officials believed persistent inflation pressures in the economy meant the next interest rate move was likely to be up.
* Separate data also showed U.S. inflation accelerated in June to its fastest annual rate since 1991, seemingly ruling out any chance of further rate cuts. [nN16428685]
* The Aussie recovered against the yen, rising to 102.48 yen AUDJPY=R from 102 yen late here on Wednesday, after stocks on Wall Street rallied and lent support to demand for leveraged carry trades.
* The Aussie could get a boost from a report in the Financial Times (www.ft.com) which said some of the world's largest sovereign wealth funds are seeking to cut exposure to the U.S. dollar amid continued market turbulence. [nSYD215598]
* Australian bond futures were lower as safe-haven inflows eased. Local bonds could come under pressure as markets veer toward the view that the central bank was more likely to keep rates on hold rather than consider cutting them in coming months.
* Three-year Australian bond futures YTTc1 fell 0.03 points to 93.56, while the 10-year bond contract YTCc1 was slightly lower at 93.675. (Reporting by Anirban Nag; Editing by Mark Bendeich)
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