THE Australian dollar closed almost a cent lower with expectations for a half a percentage point interest rate rise next week.
At 5pm (AEDT) today, the Australian dollar was trading at 91.08 US cents, down from Tuesday's close of 91.89 cents.
During the local session, the unit moved between 90.74 US cents and 92.01 US cents.
Nomura Australia chief economist Stephen Roberts said the dollar experienced "quite a fallback'' after the publication of the September quarter consumer price index (CPI) at 1130 AEDT.
"I think, in part, it's a recognition that the RBA (Reserve Bank of Australia) is tightening policy,'' Mr Roberts said.
"But even after the CPI, they are starting at 25 basis points next week, not 50.''
The headline CPI rose 1.0 per cent in the September quarter for an annual rate of 1.3 per cent, the Australian Bureau of Statistics said today.
It was the slowest annual pace for headline inflation since the June quarter of 1999, when it was 1.1 per cent.
The annual rate for the year ended June 2009 was 1.5 per cent.
The results were slightly above market forecasts for a quarterly rise of 0.9 per cent and an annual increase of 1.2 per cent in headline inflation.
The debt futures market has now fully priced in the RBA taking the cash rate to 3.50 per cent from its current 3.25 per cent when the central bank's board meets on November 3.
Mr Roberts said there was no "real upside surprise'' in the inflation numbers that might have led the RBA to raise the cash rate by 50 basis points.
He said the local unit came under pressure as investors became more risk averse in domestic and overseas equity markets.
The euro finished at 1.4819 US dollars, down from Tuesday's close of 1.4903 US dollars, and at 135.21 Japanese yen, down from 137.25 yen previously.
The US dollar ended the local session at 91.23 Japanese yen, down from 92.12 yen previously.
