By Mark Mulligan
The Australian dollar ended slightly up in quiet trade on Monday, as markets appeared to calm after last week's turbulence.
In late local trade, the Aussie was fetching US87.76¢, compared with US87.48¢ at the same time on Friday. The local unit seems to have settled in a new narrow trading range between US86.50¢ and US88.50¢.
"As calm returned to stock and bond markets, the long dollar trend returned," said OANDA Asia Pacific's senior trader Stephen Innes.
Aussie investors will on Tuesday will be looking closely at the full minutes of this month's Reserve Bank of Australia's policy meeting, when it kept the cash rate on hold for the 14th month in a row. There were no market-moving comments by RBA Assistant Governor Christopher Kent when he addressed Leading Age Services Australia National Congress in Adelaide on Monday.
"The tendency for traders when markets are stuck in the middle of the established short-term range is to not get involved and wait for a big move towards support or resistance then re-evaluate," said OANDA's Mr Innes.
"Traders are largely sitting on the sidelines at this point."
Aside from the RBA minutes, this week's big data release is third-quarter inflation numbers on Wednesday.
National Australia Bank has broken with the pack to tip a flat quarter for the consumer price index, which would mean a rate of 1.9 per cent for the year, just outside the lower end of the RBA's own target range.
NAB's bet contrasts with a 0.4 per cent growth average garnered from a Bloomberg survey, which would equate to an inflation rate of 2.3 per cent for the 12 months.
Factors arguing for a low CPI score include lower petrol, fruit and vegetable prices, plus the impact of scrapping the carbon tax. TD Securities, which runs its own monthly inflation count, is also tipping 0.4 per cent for the quarter.
"Another deviation from expectations holds the potential to catalyse knee-jerk volatility for the currency," said FXCM market analyst David de Ferranti.
"Yet follow-through is likely to prove difficult given it would take a significant surprise to materially alter [interest] rate expectations.
"While many Aussie carry trades may have already been unwound, short positioning in the futures markets remains well off the extremes of last year," said Mr De Ferranti.
"This suggests there is plenty of room in the short trade before it begins to look crowded."
Elsewhere in the region, a raft of top-tier economic data is due this week from China, including third-quarter gross domestic product numbers on Tuesday. Any disappointments from Australia's biggest trading partner and the world's second-largest economy could feed further market volatility and would prove negative for the Australian dollar.
"The most likely and obvious impact of any further commodity price weakness . . . will be Australian dollar weakness,"said Australia and New Zealand Bank in a note on Monday.