Australian dollar pauses after blistering rally, rate support intact

The Australian dollar paused after a strong run on Wednesday, holding at $0.7220 after a four-month peak of $0.7231 overnight, according to Business Recorder. Broader tensions in the Gulf dampened appetite for riskier assets, though hawkish messages from the central bank kept rate expectations firm. Having advanced more than 5% since its June trough, the currency is now approaching a May high of $0.7277 and a mid-2022 top of $0.7285.

Deputy Governor Andrew Hauser of the Reserve Bank of Australia said the board will discuss a possible rate increase at its 28-29 September meeting. He also voiced growing concern about inflation. The central bank has kept its rate at 4.35% for two straight meetings after lifting it by 75 basis points earlier this year, while the economy continues to beat forecasts. Goldman Sachs has brought its hike forecast forward to this month from November, after Hauser's comments and higher oil prices.

Market bets on a move this month climbed to 75% from 67% a day earlier, and traders see an 80% chance rates reach 4.85% next year. Against several other currencies the Aussie stayed close to multi-year highs, trading at NZ$1.2325, a whisker under the 13-year peak set on Tuesday at $1.2351. The kiwi dollar was flat at $0.5858 after falling as traders trimmed wagers on additional hikes from the Reserve Bank of New Zealand.