Better risk sentiment help antipodeans, but traders wait for U.S. inflation data

HONG KONG (Reuters) – The Aussie and Kiwi dollars were trading near multi-week highs on Thursday as investors turned more bullish on risk assets such as equities while the dollar held in a narrow range ahead of U.S. inflation data due later in the day.

The Australian dollar was last at $0.717, not far from the $0.7194 touched the day before, which was near a three-week high.

Analysts at Westpac in a morning note to clients pointed to the “explosion higher in metals markets, lift in global risk sentiment and a softish U.S. dollar” as factors supporting the Aussie, adding “a close above $0.7183 would suggest a further extension towards $0.7225 and possibly $0.7275.”

MSCI’s World Index is up about 2% this week after a bruising January, helped by a string of upbeat earnings, and a few positive headlines suggesting tensions between the West and Russia over Ukraine may be easing. [MKTS/GLOB]

Aluminium prices rose to 13-1/2 year highs on Wednesday and other industrial metals also gained.[MET/L]

The New Zealand dollar, which reached a two-week high of $0.66975 on Wednesday, was at $0.66850, while the improved risk sentiment also weighed a little on the safe haven yen, which was at 115.58 per dollar, the weak end of its recent range

But currencies in general were in something of a holding pattern waiting for the U.S. consumer price index data, which could offer investors further clues about the pace of the Federal Reserve’s monetary tightening.

A 0.5% month-over-month increase in January, and 7.3% for the year, is expected, according to economists polled by Reuters, but higher-than expected numbers could would signal more aggressive interest rate increases.

Markets are widely expecting a 25 basis point interest rate increase by the Federal Reserve at its March meeting, and some are talking up the possibility of a larger 50 basis point jump.

However, Cleveland Federal Reserve President Loretta Mester said on Wednesday she did not see a compelling case to start with a 50 basis point rate increase, adding future rate increases after March would depend on the strength of inflation and how much it moderates or persists.

U.S and European government bond yields have been rising as expectations of rate increases grow, but were quieter on Wednesday and Thursday morning.

Yields on U.S. benchmark 10-year notes were were 1.9354% in early Asia Thursday, just off Tuesday’s 1.970%, a 27-month high.

The euro was at 1.1416, having edged lower this week after President Christine Lagarde said on Monday there was no need for extensive tightening, calming increases this year.

In the world of cryptocurrencies, bitcoin was steady around $44,200 just off Tuesday’s five-year peak of $45,501.