Aussie dollar rises to highest since February 2023

The Australian dollar was enjoying the view near 19-month peaks on Sept 25 after inflation data slowed much as expected and failed to move the dial on rate cuts.

The currency had been boosted by hopes the latest package of Chinese stimulus measures might help revive demand there, supporting prices for Antipodean commodity exports.

The Aussie dollar stood at 0.6890 against the US dollar and 0.8835 against the Singapore dollar at 11.15am on Sept 25.

The rally made bullish breaks of multiple former peaks and opens the way to 0.7030 and 0.7088 versus the greenback.

Australia's monthly consumer price (CPI) report showed a drop of 0.2 per cent in August, taking the annual pace down to 2.7 per cent from 3.5 per cent.

That was a three-year low and back within the Reserve Bank of Australia's (RBA) target band of 2-3 per cent, though much of the drop was due to temporary government rebates on electricity.

Core inflation also slowed to 3.4 per cent, from 3.8 per cent, but crucially remained above the RBA band and a hurdle to rate cuts.

Just the day before, the head of the RBA made it clear that further progress was needed on core inflation before a policy easing could be considered.

Governor Michele Bullock did concede that, for the first time since March, the board had not explicitly discussed a hike in rates, which was taken as slightly dovish by investors.

"The RBA will look past the sharp fall in headline inflation, but underlying inflation does appear to be easing in earnest," noted Abhijit Surya, an economist at Capital Economics.

"The RBA has seldom started cutting rates when core inflation was outside its target range," he added.

"Nevertheless, the CPI suggests that risks are tilted towards the RBA starting its easing cycle sooner than our current forecast of Q2 2025."

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