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    Asian Session – Aussie up on strong inflation data; dollar steady ahead of FOMC

    Asian stocks were mixed on Wednesday with Tokyo gaining 2.7% following a strong close on Wall Street yesterday. But shares in China failed to rebound from Tuesday’s big slump to drop another 0.5% in today’s Asian session on fears of margin calls triggering further losses.

    The yen was firmer in Asian trading as risk sentiment weakened slightly on Wednesday. The dollar hit a low of 118.03 yen before rebounding slightly to 118.19 in late session. The euro also came off earlier lows to climb to 128.51 yen.

    The Australian dollar was given a lift from stronger-than-expected inflation figures. Australian CPI rose by 1.7% year-on-year in the fourth quarter of 2015. This was above expectations of 1.6% and an increase on the third quarter’s 1.5% rate. The data eliminates any hopes of a cut in interest rates by the Reserve Bank of Australia when it meets next week. The aussie hit a high of 0.7050 before easing to 0.7031 against the US dollar in late Asian trading.

    It was a different story for the New Zealand dollar which retreated from highs of 0.6515 at the start of Asian trading to around 0.6481 in late session. The kiwi is likely to come under pressure ahead of the Reserve Bank of New Zealand’s policy decision tomorrow, which could sound dovish on the back of recent weak inflation numbers.

    Oil prices gave up some of yesterday’s gains as profit taking pushed prices back below $31 a barrel today. The latest weekly US crude inventory data released later today could provide some support though if US stocks show a small decline as expected.

    Gold held above $1100 an ounce today as the recent market turbulence has driven the precious metal to near three-week highs.

    In European markets, the euro stuck to a tight range against the dollar and was last trading at 1.0864 dollars. The pound was also steady against the greenback at 1.4326 dollars.

    The US currency is likely to remain rangebound ahead of the Fed’s policy decision later today. The FOMC is not expected to raise rates but the meeting statement will be closely scrutinized on any changes to the Fed’s outlook on the US economy.

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