Australian dollar opens lower against the greenback

Moves in the Japanese Yen overnight supported the Australian dollar throughout most overnight session, but a slight late resurgence in the greenback brought the unit back to earth.

At the Asian open on Wednesday, the local unit was trading at 75.02 U.S. cents down from 75.16 cents at Tuesday's close.

The Australian dollar has been under pressure on expectations local inflation data will remain weak, forcing the Reserve Bank of Australia to cut rates at its August meeting. The unit however rallied over the past 18 hours on greenback weakness as traders piled into the Japanese Yen following leaked reports the stimulus measures by the Japan's government for a faltering economy will be much less than the market expects.

The Australian dollar managed to pare back from its 75.38 U.S. cent high overnight in the lead up to key local inflation data released mid-morning as the U.S. dollar recovered overnight on encouraging U.S. leading economic indicators, Commonwealth Bank of Australia senior currency strategist Elias Haddad said.

"The Australian dollar can fall by more than one percent today because we expect the policy relevant Australian (second quarter) underlying (Consumer Price Index) CPI inflation to be below the (Reserve Bank of Australia's) project of 1.5 percent per annum," Haddad said.

"This would raise the odds the RBA cuts rates by 25 basis points in August (and November) and undermine the Australian dollar."

The falls in the greenback however support industrial commodities and commodity based currencies, thus at 1007 local time (AEST), the Australian dollar continued to be supported at 75.16 U.S. cents. Endit