The Australian dollar surged to a fresh three-year high on Thursday, fueled by record gold prices and growing bets on a domestic rate hike. This momentum also propelled the New Zealand dollar to a seven-month top.
The US dollar found some relief overnight from recent selling pressure. Treasury Secretary Scott Bessent affirmed Washington's strong-dollar stance, following President Donald Trump's dismissal of the currency's slide. A somewhat hawkish Federal Reserve decision to hold rates steady citing a robust economy bolstered the greenback further. Markets now expect the next rate cut in June, after Fed Chair Jerome Powell's term ends in May.
Even so, the Australian and New Zealand dollars led the pack. The Aussie touched an intraday peak of $0.7050, up 0.4% overnight for its eighth consecutive gain. Gold, a key Australian export, hit a record near $5,600 per ounce that day. It later dipped 0.2% to $0.7025 in Asian trading amid mixed US tech earnings and shifting stock sentiment.
All four major Australian banks now forecast a 0.25% rate hike from the Reserve Bank of Australia (RBA) next Tuesday, spurred by hotter-than-expected quarterly inflation. Only a few voices, like Goldman Sachs and Deutsche Bank, still predict a hold.
Goldman Sachs chief economist Andrew Boak noted: “We do not view the +0.9% quarter-on-quarter rise in trimmed mean inflation as enough upside surprise to shift the RBA from easing bias to a hike in just three months.” He added that February's call looks tight, with precedents of the RBA defying expectations.
An RBA hike would make it the first non-Japan G10 central bank to raise rates amid the global easing cycle.
Across the Tasman, the kiwi dollar slipped 0.2% to $0.6050 after peaking at $0.6070 a seven-month high. Key resistance sits near $0.6060 and $0.6120. The Reserve Bank of New Zealand meets February 18 and is widely expected to hold at 2.25%, with any hike likely delayed until the second half of the year.
