SYDNEY, Sept 30 (Reuters) - The Australian dollar popped higher on Tuesday after the country's central bank held interest rates steady as expected while sounding a hawkish note on inflation, encouraging market wagers that a near-term cut might be a close call.
The Reserve Bank of Australia wrapped up its September policy meeting by keeping the cash rate at 3.60%, having already eased three times this year.
The statement noted that consumer demand and inflation were running a little higher than forecast, while playing down signs of weakness in employment growth.
Markets responded by trimming the chance of a rate cut at the next meeting in November to around 40%, from 55% beforehand. Investors were also leaning toward the idea that there might only be one more quarter-point easing to come, rather than two.
The Aussie rose 0.5% to $0.6606 , adding to a 0.4% gain the previous session. Support lies at last week's low of $0.6521, with resistance around $0.6628.
"The RBA's more hawkish messaging raises the risk that it won't cut rates as far and/or as quickly as we're currently predicting," said Abhijit Surya, a senior APAC economist at Capital Economics, who was sticking with a call for a quarter-point easing in November.
"We still think there's a strong case for the Bank to resume policy easing before long," he added. "The longer the Bank leaves rates in restrictive territory, the greater the risk of the ongoing recovery fizzling out and underlying inflation undershooting the mid-point of the 2-3% target band."
Investors had seen almost no chance of the RBA cutting this meeting, assuming the central bank would wait to see inflation data for the third quarter due out in late October before deciding whether to ease again.
While monthly consumer price data for August had surprised on the high side, the series has not been a reliable predictor of the quarterly outcome.
Three-year bond futures eased 5 ticks to 96.358, having slid 17 ticks last week in the wake of the CPI report.
Across the Tasman, the Reserve Bank of New Zealand is considered certain to cut its 3.0% cash rate when it meets next week, with markets implying a 30% chance it might even ease by 50 basis points.
The kiwi dollar edged up 0.2% to $0.5785, but remained uncomfortably close to last week's six-month trough of $0.5755. Resistance comes in at $0.5795 and $0.6830.
* The content presented above, whether from a third party or not, is considered as general advice only. This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.
