The Australian dollar has continued to tumble as speculation firms that the Reserve Bank will cut official interest rates at its board meeting next Tuesday prior to the federal budget.

The local currency has suffered a slump of more than 2 per cent since figures were released yesterday showing consumer prices went backwards in the first quarter – the first quarterly fall since December 2008.

It slid from 77.6 to 76.15 US cents on Wednesday, extending those losses to 75.71 US cents overnight and this morning it was was worth 75.97 US cents.

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The Australian share market liked the prospects of a rate cut and the S&P/ASX 200 index was up 0.4 per cent to 5210.3 points in morning trade

On the cross-rates the Aussie dollar was buying 67.08 euro cents, 52.25 British pence, 84.67 Japanese yen and $NZ1.09.

Before Wednesday’s  inflation data was published, the market was pricing in an 11 per cent chance of an interest rate cut at the RBA’s May board meeting.

That jumped to 50 per cent once the figures came out, and has since climbed to 57 per cent with NAB predicting a cut.

The Reserve Bank last cut interest rates in May 2015, to the historically low level of 2 per cent.

US stocks rise

Elsewhere on financial markets, US stocks increased slightly overnight, after the Federal Reserve left interest rates on hold and provided scant information on when its next rate rise might be.

The Federal Reserve next meets in the middle of June and, while the US labour market continues to gain strength, inflation remains below the Fed’s target of 2 per cent.

A Reuters poll of economists forecasts two interest rate increases this year, but CME Group’s FedWatch tool shows traders were not expecting a rate rise until at least September.

Meanwhile, technology stocks came under pressure overnight, after Apple slumped more than 6 per cent, following its first fall in revenue in a decade.

The Dow Jones Industrial Average gained 0.3 per cent to close at 18,041.

The S&P 500 Index edged 3 points higher to 2,095 and the Nasdaq ended 0.5 per cent lower at 4,863.

European markets made modest gains – in London, the FTSE 100 Index closed up 0.6 per cent at 6,319.

West Texas crude oil had strengthened to $US45.24 a barrel, the price of a barrel of Tapis was slightly lower at $US46.66, and spot gold had edged up to $US1,245.70 an ounce.