SYDNEY/WELLINGTON: The Australian and New Zealand dollars jumped on Tuesday on rising appetite for the high-yielding currencies and as the greenback edged away from a seven-month peak after recent gains.
The Australian dollar hit a two-week high of $0.7665, and was heading for a sixth straight day of gains.
Early on Tuesday, the Aussie began rallying after Reserve Bank of Australia Governor Philip Lowe said he was comfortable with the current exchange rate.
The Aussie is among the best performing major currencies this year, up more than 5 percent against the U.S. dollar. Much of the gain is due to carry trades where investors borrow in currencies seen as safe havens such as the yen or the euro to invest in high-yielding assets.
A recent rebound in prices of iron ore and coal - Australia's two largest exports - has also helped the Aussie.
Early Tuesday, newly-released minutes of the RBA's October policy meeting said coming data on inflation and employment will be critical for decisions at its next meeting on Nov. 1, opening the door to possible policy easing.
However, investors still assume easing is a distant possibility. Interbank futures imply only a 16 percent chance of a cut in the 1.5 percent cash rate next month.
"Given the neutral stance in the RBA minutes, coupled with some positive moves in risk this morning, we could see the Aussie dollar supported throughout the session," said Stephen Innes, senior trader at OANDA Australia and Asia Pacific.
At the same time, the Aussie is gaining on the back of data showing that inflation was higher than expected in New Zealand in September, Innes added. Australian inflation often surprises in the same direction as New Zealand sees.
Annual inflation in New Zealand was 0.2 percent, when economists had forecast 0.1 percent. That helped lift the Kiwi dollar to a one-week high of $0.7184.
"We remain comfortable with our call for another 25 basis point official cash rate cut from the RBNZ in November, but are a little more cautious about the need for further policy easing from there," said Kiwibank senior economist Zoe Wallis.
The Reserve Bank of New Zealand (RBNZ) is still widely expected to cut rates by 25 basis points to a record low 1.75 percent at its Nov. 10 policy meeting, but the market has lengthened the odds on moves beyond that.
New Zealand government bonds eased, sending yields 3.5 bps higher across the curve.
Australian government bond futures were lower too, with the three-year bond contract down 2 ticks at 98.27. The 10-year contract slipped 3.5 ticks to 97.68.
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