RPT-FOREX-Aussie scales 8-month highs as risk appetite blooms

Reuters

(Repeats to additional subscribers)
    * U.S. inflation data seen key event risk in session
    * Money mkts: Less than 50 pct Fed hike chance over next yr
    * Graphic: World FX rates in 2017 http://tmsnrt.rs/2egbfVh

    By Saikat ChatterjeeLONDON, July 14 (Reuters) - The Australian dollar hit a
fresh eight-month high on Friday as risk appetite was robust
with global stock markets hitting record highs and after dovish
comments from global policymakers.
    The Australian dollar rose 0.4 percent to $0.7758, well on
track to post its best weekly performance in four months. It
gained by a similar quantum against the Japanese yen. 
    The U.S. dollar remained broadly on the back foot as traders
preferred to play the risk-on trade against the yen, especially
before key U.S. inflation data later today that may skew
interest rate expectations in the markets.
    "Current market pricing suggests that the impact of these
inflation related releases could be asymmetric, with higher
inflation expectations leading towards a repricing of the U.S.
curve translating into dollar strength," Morgan Stanley
strategists wrote in a note.
    Money markets pricing suggests less than a 50 percent chance
of a hike over the next year, according to CME's FedWatch tool.
    For the week, the Australian dollar  and the Canadian
dollar  are among the top gainers after European shares
were poised to post their best week since late April.

    Major market gauges of asset volatility, such as the Merrill
Lynch Option volatility estimate <.MERMOVE1M> and VIX <.VIX>,
drifted lower on Friday, providing a boost to carry trades.
    The U.S. currency's recent advance, notably against the yen
, has stalled towards the end of this week after Federal
Reserve Chair Janet Yellen curbed some of the monetary
tightening expectations that had supported the greenback.
    That view was further reinforced by other U.S. policymakers
such as Dallas Federal Reserve Bank President Robert Kalpan on
Thursday, though analysts were wary of kicking the dollar lower
before U.S. inflation data.
    Signs of a pick-up in U.S. inflation could reinforce views
that the Fed would hike interest rates again sooner rather than
later, which would lift Treasury yields and the dollar.
    However, the core consumer price index (CPI) is forecast to
have risen only 1.7 percent year-on-year in June after a similar
gain in May. On a month-on-month basis, the core CPI is expected
to rise 0.2 percent after a 0.1 percent gain the previous month.

    "It is broadly a U.S. dollar-negative market as latest
comments from Yellen and others suggest that interest rates will
rise very gently and that is supportive for high-yielding
currencies for now," said Viraj Patel, an FX strategist at ING
Bank in London.
    The euro was a shade higher at $1.1418 , unable to
find much of a lift even as Germany's 10-year bond yield
 climbed back above the 0.50 percent threshold
overnight. That followed a report that the European Central Bank
is likely to signal in September that its asset purchase
programme will be gradually wound down next year.
    For Reuters Live Markets blog on European and UK stock
markets see reuters://realtime/verb=Open/url=http://emea1.apps.cp.extranet.thomsonreuters.biz/cms/?pageId=livemarkets

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Graphic: World FX rates in 2017    http://tmsnrt.rs/2egbfVh
    ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
 (Additional reporting by Shinichi Saoshiro in TOKYO; Editing by
Toby Chopra)
 ((saikat.chatterjee@thomsonreuters.com; +44-20-7542-1713;
Reuters Messaging: saikat.chatterjee.reuters.com@reuters.net))

Keywords: GLOBAL FOREX/ (REPEAT, UPDATE 3)
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