The Australian dollar was weaker as markets warmed again to the idea that the central bank will cut interest rates next month.
"Domestic press speculation of an RBA rate cut in early August has weighed on the Australian dollar," RBC Capital Markets currency strategist Sue Trinh said in Hong Kong.
Mixed second-quarter inflation data on Wednesday had prompted investors to pull back bets of a further cut from the Reserve Bank of Australia's policy-setting board meeting on August 6. But, the uncertainty evaporated as closely followed newspaper columnists predicted a cut to a record 2.50 per cent from 2.75 per cent.
Futures markets returned to pricing in a 66 per cent likelihood of a cut in interest rates next month - up from near to 50 per cent yesterday.
"This is a disinflationry environment and highlights why the RBA's easing cycle is not over," JPMorgan debt strategist Sally Auld said.
"Perhaps the best way to think about this week's inflation data is to say that while they didn't deliver a smoking gun to the RBA they are certainly no impediment to a cut should the RBA desire looser monetary policy."
Late today the Australian dollar was trading at US91.58c compared with US92.56c late yesterday.
The Australian dollar was lower against the New Zealand dollar after the Reserve Bank of New Zealand indicated less willingness to lower interest rates, Ms Trinh at RBC said.
The New Zealand dollar jumped close to a five-year high against the Australian dollar. In late Wellington trading the kiwi was at A87.16c compared with A86c late yesterday.
The US dollar was higher in Asia on talk former US Treasury Secretary Lawrence Summers may succeed Fed chairman Ben Bernanke whose term expires in January. The race to become next leader of the US central bank looks increasingly like a contest between Mr Summers and Fed Vice Chairman Janet Yellen, analysis by the Wall Street Journal suggests.
