Aussie, kiwi climb toward 2025 highs as US dollar weakens on Fed autonomy concerns
The Australian and New Zealand dollars extended their winning streaks on Thursday, approaching the highest levels so far in 2025, as the U.S. dollar fell to multi-year lows on concerns over the future independence of the Federal Reserve.
The Aussie strengthened 0.5% to $0.6542, just within a whisker of its recent peak of $0.6552, the highest level since last November. The currency has climbed for four consecutive sessions, with the recovery from Monday's sharp low of $0.6373 reinforcing a sustained upward trend.
The kiwi also gained 0.5% to $0.6065, just under its recent top of $0.6088, the highest since last October. It remains well above Monday's low of $0.5883, hit after U.S. strikes on Iran sparked fears of a widening conflict in the Middle East.
In the broader market, the dollar slipped to more than three-year lows against its major currencies after the Wall Street Journal reported that U.S. President Donald Trump has considered announcing Fed Chair Jerome Powell's replacement by September or October, aiming to undermine his position.
Down Under, Westpac has become the latest bank to predict a rate cut from the Reserve Bank of Australia in July, after a subdued inflation reading for May raised the risk of inflation slipping below the midpoint of the RBA'S 2-3% target band.
"What we are about to see is an RBA that was planning to cut rates soon anyway deciding it may as well get on with it rather than make a contestable argument for further delay," said Luci Ellis, chief economist at Westpac.
"But this is not the timing it previously thought it would be on. Given the lingering uncertainties and the RBA's concerns about a tight labour market, expect its post-meeting language to be non-committal, even a little grudging about the decision to cut."
In the bond market, three-year bond futures hit a two-month high of 96.78, having rallied 4 ticks on Wednesday, helped by expectations that the RBA will cut rates as soon as next month. They, however, ran into selling pressures at a major chart level of 96.79.
Yields on 10-year Australian government bonds were flat at 4.12%, having come a long way from highs of 4.583% briefly touched in mid-May.
Alex Cousley, senior portfolio manager at Russell Investments, is bullish about Australian government bonds, citing improved inflation prospects Down Under.
"We are of the view that if deficits and debt become the big narrative in government bond markets, Australia is a pretty good place to hide."
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