The Australian Dollar climbed to its highest level in three years on Thursday, buoyed by another surge in gold prices to record highs and growing expectations of a near-term domestic interest rate hike, which also helped push the New Zealand Dollar to a seven-month high.
Meanwhile, the US Dollar found some support overnight after Treasury Secretary Scott Bessent reaffirmed Washington’s commitment to a strong-Dollar policy, following President Donald Trump’s dismissal of the currency’s recent decline.
Additional backing came from a slightly hawkish Federal Reserve, which kept interest rates unchanged while pointing to a “solid” economy, prompting markets to delay expectations for the next rate cut until June, after Chair Jerome Powell’s term concludes in May.
Even so, the two Antipodean currencies outperformed their peers. The Australian Dollar touched an intraday high of $0.7050 after gaining 0.4% overnight, marking its eighth consecutive day of advances.
Gold prices, one of Australia’s key exports, climbed to a fresh record of almost $5,600 an ounce on Thursday.
The Aussie later slipped 0.2% to $0.7025 in Asian trading as investor mood in equity markets soured following mixed earnings results from major US technology companies, Reuters reports.
All four of Australia’s major banks are now forecasting a 25-basis-point interest rate increase by the Reserve Bank of Australia (RBA) next Tuesday, after inflation came in higher-than-expected last quarter.
In contrast, only a handful of institutions, including Goldman Sachs and Deutsche Bank, continue to anticipate no change in rates.
“We do not view +0.9% qoq increase in trimmed mean inflation as a large enough upside surprise to the RBA’s forecast to warrant monetary policy shifting from an easing bias to an actual rate hike in just three months,” stated Andrew Boak, chief economist at Goldman Sachs.
“We view February’s decision as a very close call and note several recent precedents where the RBA has been prepared to surprise market expectations.”
If the RBA raises rates next Tuesday, it would become the first G10 central bank outside Japan to tighten policy during the current global easing cycle.
Furthermore, the New Zealand Dollar also slipped 0.2% to $0.6050 after earlier touching a seven-month high of $0.6070. Resistance is seen around $0.6060 and $0.6120.
The Reserve Bank of New Zealand meets again on 18th February and is widely expected to keep interest rates unchanged at 2.25%, although markets anticipate the next policy move will be a hike, likely in the second half of the year.