Despite the high CPI number, keeping the Yuan undervalued seems to be more of a priority to the Chinese government than fighting inflation. The market had universally expected a rate hike this weekend but the Chinese authorities held off.
There is an upside danger in this for the AUD. We might see some short covering of positions taken in expectation of a Chinese rate hike. As yet there is still no movement in the interbank market, with the AUD/USD sitting at .9850.
