SYDNEY: The Australian dollar recoiled from a key hurdle against its US counterpart on Thursday and hovered near an eight-month low against the kiwi on the risk of another near-term interest rate hike in New Zealand.
The Aussie and the kiwi also hit fresh nine-year peaks on the yen as markets wagered that the Bank of Japan will keep policy accommodative.
The two Antipodeans are among the most liquid of carry trades where investors typically borrow yen at ultra-low rates to buy higher yielding currencies.
The Australian dollar was flat at $0.6554, having moved as high as $0.6572 overnight.
The 200-day moving average of $0.6564 is proving to be heavy resistance.
It hit 98.67 yen, the highest in nine years.
The kiwi dollar rise to a fresh one-month top of $0.6198, having risen 0.2% overnight to as high as $0.6198. It climbed 0.2% to 93.2 yen, also a nine-year top.
The risk of a near-term rate hike from the Reserve Bank of New Zealand was in stark contrast to bets that the Reserve Bank of Australia is done tightening.
The Aussie hovered at NZ$1.0576 , just a touch above an eight-month low of NZ$1.0568.
“The RBNZ may opt to stop crying wolf and deliver a 25bp hike, and signal the risk of yet another move towards 6%,” said Jarrod Kerr, chief economist at Kiwibank.
“It’s overkill, in our opinion, but the RBNZ may opt to stamp out inflation, hard.”
In the broader foreign exchange market, the dollar was broadly steady after minutes from the Federal Reserve’s last meeting showed concerns about cutting interest rates too soon, much as expected.
Local yields tracked their US counterparts higher due to a weak 20-year bond auction.
Australia’s three-year government bond yield rose 4 basis points to 3.782%, while ten-year yield edged 3 bps higher to 4.22%.
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