Australian dollar holds firm as yields hit six-month highs

Business Recorder reported that the Australian dollar stayed close to a recent high on Thursday, as traders increased bets on a near-term interest rate increase. Short-term bond yields climbed to their loftiest level in nearly half a year. Hawkish remarks from the Reserve Bank of Australia, along with Brent crude trading above $101 a barrel, have pushed traders to assign an 80% probability to a hike later this month.

The three-year yield rose 8 basis points to 4.905%, close to a March peak at that same level. A move beyond that point could push yields to levels last seen in mid-2011, with a bearish projection near 5.30% cited. JPMorgan analysts said the length of the oil shock appears to be a bigger concern than its size, and they added a 25 basis point hike for the September meeting, taking the rate to 4.60%.

Traders are looking ahead to the August labour report due on September 24, which precedes the RBA gathering on September 29. The Aussie was quoted at $0.7220 after touching a four-month high of $0.7238 overnight, and it also hit a 13-year high against the New Zealand dollar at NZ$1.2375. The kiwi rose 0.2% to $0.5847 following four sessions of losses, after the Reserve Bank of New Zealand signalled fewer rate hikes ahead than investors had expected.