.Australian Dollar Sinks on Falling PPI

The Australian dollar slumped today as the unexpected decline of producer prices in the first quarter of this year led to speculation that Australia’s central bank will decrease its interest rates on the next monetary policy meeting.

The government report showed today that Australia’s Producer Price Index fell 0.3 percent in the first quarter of 2012 from the previous three months. The report frustrated analysts who anticipated the index to accelerate from 0.3 percent in the fourth quarter of 2011 to 0.5 percent in the March quarter of this year. The decline of the PPI made economists speculate that the Reserve Bank of Australia will cut interest rates during its next monetary meeting in May. In fact, some forecasters say that the potential decrease of the rates in May can be followed by a cut in June.

AUD/USD went down from 1.0368 to 1.0289 and AUD/JPY fell from 84.50 to 83.45 as of 11:09 GMT today.