Australian dollar extends winning streak to ninth week as rate outlook shifts

Business Recorder reported that the Australian dollar climbed to a new three-month peak on Friday, extending its winning run to nine consecutive weeks. The currency gained 0.2% to $0.7204, breaking through the 72 cents level, while traders eye the May high of $0.7277, the strongest level since mid 2022.

A hot inflation report pushed bond yields higher and sharply raised expectations of another interest rate increase from the Reserve Bank of Australia. Markets now put a 52% probability on a fourth hike this year arriving as soon as next month, and a quarter-point move by year end is fully priced in. Three-year yields moved up by 10 basis points over the week to 4.679%, while ten-year yields gained 6 bps to 5.098%, their loftiest level since May.

Ray Attrill of the National Australia Bank said upside risks for the Aussie in the near term had grown, though he still sees a trading range of $0.6850 to $0.7278 for the year. Attention now turns to the Federal Reserve's Jackson Hole Symposium, where chair Kevin Warsh is due to speak, an event markets view as a key moment for the US dollar. Meanwhile the kiwi edged up 0.2% to $0.5965 but was on track for a weekly loss of 0.2%, while the Reserve Bank of New Zealand meets next Wednesday with markets pricing a 96% chance of a 25 bps lift to 2.75%.