SYDNEY: The Australian dollar stood near 20-month highs against the kiwi on Thursday as markets ramped up bets of imminent rate cuts in New Zealand, while it kept hitting new 33-year tops on the low-yielding yen.

The Aussie held at NZ$1.1080, having hit a 20-month high of NZ$1.1104 on Wednesday after the Reserve Bank of New Zealand (RBNZ) unexpectedly opened the door to rate cuts, weighing down the kiwi.

Resistance is at NZ$1.1088, the high from February 2023.

The dovish shift from RBNZ also spilled over to Australia, with swaps now implying a 20% chance of a rate rise from the Reserve Bank of Australia in August, compared with 30% before.

Still, the risk of another rate hike has helped the Aussie outperform overall, particularly against the Japanese yen as it hit another 33-year top of 109.21 yen on Thursday.

Against the greenback, the Australian dollar was 0.1% higher at $0.6752, with resistance at the $0.6762.

The kiwi dollar also inched 0.1% higher to $0.6088, having tumbled 0.7% overnight to as far as $0.6082 thanks to the dovish RBNZ.

It has support at the 200-day moving average of $0.6075.

Two-year New Zealand swap rates fell by another 4 basis points to 4.575%, the lowest level in 20 months, after a tumble of 18 bps the day before.

“Given this communication (from the RBNZ), we judge that the August policy meeting is now very live,” said Andrew Ticehurst, a senior economist at Nomura Australia.

Australian dollar sticks in soggy data, kiwi second-guesses RBNZ

“However, we will wait for Q2 CPI and labour market data before we make any change to our base case for a first rate cut in November.”

Markets are implying a 50% chance that the RBNZ could cut interest rates at their next policy meeting in August, while a total of 45 basis points of easing have been priced in for all of 2024.

In contrast, investors expect no rate cut from the RBA until late 2025.


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