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FOREX-Aussie stung by soft inflation, U.S. dollar holds near 22-month high
Published at 24/04/2019 at 10:14

* Australian dollar sheds 1 pct after softer CPI

* U.S. dollar within a whisker of 22-month high

* Swiss franc pulls away from 2019 lows on euro weakness

* Graphic: World FX rates in 2019

(Adds new analyst quote, details, latest prices)

By Tommy Wilkes

LONDON, April 24 (Reuters) - Australia's dollar dropped one percent on Wednesday after weaker-than-expected inflation numbers heightened the prospect of an interest rate cut, while the U.S. dollar held firm within a whisker of the previous session's 22-month high.

The greenback was propelled higher by strong U.S. housing data - the latest indicator to suggest the American economy is outgrowing rivals, encouraging investors to snap up the dollar in recent weeks.

Data on Wednesday showed Australia's headline consumer price index was flat in the January-March quarter, below forecasts and the lowest since early 2016.

"Given the large decline over the last 24 hours, I could see AUD bouncing back later today just on profit-taking, but I think in general it's likely to be weak for some time," said Marshall Gittler, currency strategist at ACLS Global, noting that the market expectations for a rate cut in May had grown.

He also noted data indicating currency managers were long the Aussie. "That means there are plenty of sellers of AUD left in the market," he said.

The Aussie was the biggest mover among the main currencies, falling to a 1-1/2 month low of $0.7027 .

The dollar index , which measures the U.S. currency versus a basket of six major rivals, stood at 97.622 after rising to 97.777 overnight, its highest since June 2017.

Data on Tuesday showed sales of new single-family homes in the U.S. jumped to a near 1-1/2-year high in March. U.S. first quarter GDP data on Friday could strengthen the case that while the current period of global expansion is in its late stages, the United States is on a firmer footing.

The euro weakened 0.1 percent to $1.12165 but held

above Tuesday's lows of $1.1192.

A German business climate index came in below forecasts, but had little impact on the already-weaker single currency.

"The euro is teetering as negative sentiment persists after last week's disappointing PMI data and only the size of short positions and the extent of negativity are keeping it above the year's lows," Societe Generale currencies analyst Kit Juckes said.

"It badly needs a dose of better data, or better news, and higher Bund yields would help," he added.

The weakness in the euro allowed the Swiss franc to strengthen from six-month lows marked on Tuesday.

The franc has been hit hard as investors dumped safe-haven currencies during this year's rally in risk assets. It had recovered 0.3 percent to $1.1417 francs by 0905 GMT.

Sterling extended recent losses to hit another two-month low of $1.2915 , as pressure grows on Prime Minister Theresa May to come up with a Brexit plan amid stalled negotiations with the opposition Labour party.

(Editing by Kirsten Donovan)

((thomas.wilkes@thomsonreuters.com))