Australian dollar wins hawks over, as kiwi rues RBNZ hold

The Australian dollar climbed to its strongest level in five weeks on Thursday as traders increased bets on another Reserve Bank of Australia rate increase next week. Business Recorder reported that the prospect of tighter policy lifted the currency 0.4% against the US dollar to $0.7065, while it gained 1.4% against the New Zealand dollar to NZ$1.2602, its highest point since early 2013.

The New Zealand dollar remained weak after the Reserve Bank of New Zealand left its policy rate at 2.75%, contrary to expectations for a rise to 3.0%. Governor Anna Breman said further increases were likely, and markets now assign a 76% probability to a December hike; meanwhile, traders put the chance of an Australian increase on November 3 at 83%, up from 25% a couple of weeks earlier. These shifting rate expectations are driving movement in the Australian and New Zealand currencies.