THE dollar was more than US1c lower at noon following the release of a lower than expected inflation reading.
At 11.30am (AEDT), the Australian Bureau of Statistics (ABS) announced that Australia's headline consumer price index (CPI) rose a less than expected 0.7 per cent in the September quarter, for an annual rate of 2.8 per cent.
By noon, the local unit was trading at US97.97c, down from yesterday's close of US99.19c.
Since 7am today, the local unit has traded between US97.82c and US98.60c.
CMC Markets foreign exchange dealer Tim Waterer said the lower than expected CPI means it is less likely the Reserve Bank of Australia (RBA) will raise rates next Tuesday.
"That could have been the case had we seen a quarterly rise of 0.9 per cent and not the 0.7 per cent that came out this morning.
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"So the net result of that is there is a lower likelihood of a 25 basis point tightening by the RBA.
"That's not to say there is no chance of a rate hike next week but the chances are a lot lower."
Mr Waterer said the market will be watching for US new homes sales data to be released tonight (AEDT). A good figure may push the currency down, he said.
"Last night we saw the US dollar react positively to the US consumer confidence numbers and should we see a higher new homes sales figure tonight, I would expect the greenback to once again receive some buying interest."
He said there was still a chance for the dollar to breach the US99c mark at some stage this week, given the volatility in offshore sessions.
Mr Waterer expects the local unit to trade between US97.70c and US98.30c this afternoon.
Meanwhile, bonds were mixed at noon.
Trade on the ASX24 was halted following the release of the September CPI due to a technical error, according to an Australian Stock Exchange spokesman.
By midday today on the ASX24, the December 10-year bond futures contract was at 94.780 (implying a yield of 5.220 per cent), down from 94.810 (implying a yield of 5.190 per cent) yesterday.
The December three-year bond futures contract was at 95.050, (4.950 per cent), up from 94.990, (5.010 per cent) previously.
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