Australia, NZ dollars catch a wave from Japan's forex splash

SYDNEY: The Australian and New Zealand dollars held at multi-week highs on Friday after Japanese intervention to boost the yen hammered the greenback broadly, helping the Antipodean currencies finally crack major chart barriers.

The reprieve was timely for Aussie bulls as the currency had been struggling after a benign inflation report led investors to abandon bets for a near-term hike in interest rates.

That left the Aussie at $0.7024, having climbed 1.1% overnight to a six-week top of $0.7033.

The break of $0.7026 resistance opens the way to $0.7088, while support is down at $0.6922.

The kiwi dollar stood at $0.5870, after jumping 1.5% overnight to a two-month top of $0.5882.

The break of $0.5873, if sustained, targets the May high of $0.5993.

Both currencies lost ground to the yen, with the Aussie down as much as 2.7% at one stage at 110.89 yen before partly rebounding to 112.90.

That left the Aussie off 1.3% for the week and well off the recent 114.66 peak.

The Bank of Japan on Friday held interest rates steady after a policy meeting but also reiterated further hikes were likely to stabilise inflation around 2%.

At home, markets have all but priced out any chance of a rate increase from the Reserve Bank of Australia at its meetings in August and September, while implying a 50% chance of a move in November.

Westpac, Goldman Sachs and Capital Economics all dropped their calls for a hike after this week’s inflation data.

The November pricing reflects a risk that third-quarter consumer price figures due in late October could surprise on the high side and force a hike.

“The slowdown in economic growth and cooling in the housing market that is already happening will be enough to convince the RBA not to hike further,” said Paul Bloxham, head of Australian economics at HSBC.

“But the economy will need to have an extended period of sluggish growth to get inflation to fall back to target,” he said.

“No-one should expect the RBA to sweep in and save the day by slashing rates anytime soon. Rate cuts are still quite some time away.”

Across the Tasman, markets are almost fully priced for the Reserve Bank of New Zealand lifting rates by a quarter point to 2.75% in September.

Rates are seen at 3.0% in December, and 3.5% by the middle of 2027.