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SYDNEY: The Australian dollar jumped to a two-week high on Friday after the central bank warned of upside risks on inflation, while the kiwi also benefited from wagers on ever-higher domestic interest rates.

The Aussie rose 0.6% to $0.6735, breaking through a major resistance level of the 200-day moving average of $0.6730.

It had made a modest gain of 0.3% overnight as the prospects of Federal Reserve pausing kept the US dollar in check.

The Antipodean was heading for a weekly gain of 1.8%, supported by Tuesday’s surprise hike from the Reserve Bank of Australia (RBA) and its Friday warning of the upside risk to inflation after maintaining that it was only projected at the top of a target band of 2% to 3% by mid-2025.

The kiwi was up 0.5% at $0.6308, the highest in three weeks, after rallying 0.8% overnight.

Strong jobs data on Wednesday added to the case for another interest rate hike from the Reserve Bank of New Zealand this month.

Working against the two currencies are persisting concerns about the health of the US banking sector, which have sent investors scrambling for safe assets.

Australian dollar surges as RBA springs surprise rate hike

Analysts at ANZ expect one final hike from the RBA in August, as services inflation is likely to prove sticky and getting inflation back to target in a reasonable time is key.

“Any easing in rates is some quite considerable time off based on our read of the economy,” they told clients in a note on Friday.

Markets, however, are wagering rates are at their peak, due in part to renewed banking volatility and even cuts by year-end.

Three-year bond yields slid 2 basis points at 2.982%, while ten-years were 2 bps higher at 3.339%.

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