Australia dollar hits 10-month high, kiwi restrained by dovish RBNZ

The Australian and New Zealand dollars paused near fresh peaks on Thursday as investors globally awaited a reading on U.S. inflation, while breaks of major chart resistance provided technical momentum for further gains.

A tame reading on U.S. producer prices reinforced wagers it would take a shockingly high consumer price number to stop the Federal Reserve from cutting rates next week given a clear slowdown in the labour market.

Markets, in contrast, see little chance the Reserve Bank of Australia will ease at its meeting this month following a run of solid domestic data. The probability of a quarter-point rate cut to 3.35% in November has been pared back to 75%, from 100% a couple of weeks ago.

The diverging outlook helped the Aussie hold at $0.6614 , having risen 0.4% overnight to a 10-month high of $0.6636. The rally finally cracked a July top at $0.6625 and opened the way to $0.6687 and $0.6722.

It also scored a seven-month high on the Japanese yen at 97.75, having broken resistance at 97.43. The next stops are 98.82 and 99.16.

The currency was aided by rising prices for some of Australia’s major commodity exports, notably iron ore and gold. Iron ore cleared $107 a metric ton this week to hit its highest since late February, while gold is at all-time peaks. Gold exports have been on a tear this year thanks to strong U.S. demand on fears of tariffs being placed on the metal, along with sustained buying by central banks. From January to July, Australian gold exports rose 67% from the same period last year to a record A$35 billion ($23.16 billion).

The kiwi dollar lagged at $0.5940, after firming 0.3% overnight to a one-month peak of $0.5964. It faces resistance around $0.5996 and $0.6059.

The head of the Reserve Bank of New Zealand on Thursday reaffirmed its dovish outlook for a further 50 basis points of rate cuts to 2.5% by the end of the year, with the speed of the easing to be decided by data.

That heightened the importance of a gross domestic product report due next week that is likely to show the economy shrank around 0.3% in the June quarter.

“That would leave the economy the same size as one year ago – no yearly growth,” said Josh Williamson, an economist at Citi. “Regardless, the RBNZ needs to cut the cash rate to erase the negative output gap.” ($1 = 1.5113 Australian dollars).