Commodity currencies feel the heat as China data looms

Reuters - Commodity currencies nursed heavy losses early on Wednesday, while the other major currencies struggled for clear direction as investors kept a nervous eye on developments in Ukraine and ahead of a slew of Chinese economic data.

The market is braced for China to report its slowest growth in five years in the first quarter at a time when Beijing appears to be resisting pressure to inject fresh stimulus into the economy.

"Investors are quite nervous about today's Q1 GDP print. There have been plenty of reports highlighting the risk of China growth falling short," said Stan Shamu, strategist at IG in Melbourne.

Caution ahead of the figures and news that Ukraine had launched military operations against separatists, conspired to weaken commodity currencies. The New Zealand dollar was further hit by surprisingly soft inflation data at home.

The kiwi fell to its lowest in over a week at $0.8592 after annual inflation slowed to 1.5 percent, prompting markets to pare back aggressive interest rate hike expectations for this year.

Its Australian peer plumbed a one-week low at $0.9337 , having suffered its biggest one-day fall in a month.

Both Antipodean currencies also lost ground against the yen and the euro.

The action among the G3 currencies was more subdued with the euro drifting up from one-week lows against the dollar and yen to last stand at $1.3811 and 140.69 yen.

The greenback, meanwhile, stayed under 102.00 yen, having traded between 101.50 and 102.00, well within the previous session's range. That left the dollar index just a shade firmer at 79.802.

U.S. data out on Tuesday showed consumer prices firmed a bit in March in a possible sign that a disinflationary trend had run its course.

The increase should allay concerns among some Federal Reserve officials that inflation was running too low, although the rise was mild enough to suggest the central bank could keep benchmark interest rates near zero for quite some time.