In this Asia Focus Andrew Robinson, correspondent for Saxo Capital Markets reviews the Asian interest rate and inflation situation, looking specifically at Australia, China and New Zealand.

The minutes from the Reserve Bank of Australia’s latest meeting were more dovish than expected with talk of the need for a tightening in rates omitted, thereby indicating a significant turnaround in sentiment. The Aussie dollar was knocked back somewhat and all eyes will now be on the second quarter inflation report due July 27 with the AUDUSD not likely to do much before then.
The People’s Bank of China has hiked rates three times this year, with the latest increase earlier this month, in a bid to curb inflation and one would normally expect a dampening to be emerging by now. But inflation is still on the rise, with the latest report printing a 6.4% rate for June, a three-year high. Food price increases are seen as the driving force and so far authorities are willing to look through this, but the question is for how long?
On the note of inflation, looking to New Zealand, second quarter inflation came in above forecast at a 21-year high. Based on this a rate increase is on the cards but probably not before the fourth quarter.
For more Asian market news by Andrew Robinson see his TradingFloor.com commentary: http://www.tradingfloor.com/users/andrew-robinson