The Australian dollar has risen Friday, buying 68.91 US cents from 69.22 US cents on Thursday.
Yesterday, the local currency hit a three-month high as investors scaled back wagers on local interest rate cuts after the US Federal Reserve signalled a pause in its easing campaign.
The Aussie reached a three-month top at 69.05 US cents, having been as low as 68.49 at one stage on Wednesday.
The kiwi dollar also popped up – to 64.09 US cents – after Westpac economists changed their call on New Zealand interest rates, now expecting no cut at the Reserve Bank of New Zealand’s policy meeting on November 13.
The bank, like much of the market, had thought the RBNZ was odds-on to cut its cash rate by 25 basis points to 0.75 per cent, but a run of better domestic economic data and an improvement in global market sentiment changed the balance of risks.
Also influential was the US Fed’s decision to move to a more neutral stance after it cut rates as expected on Wednesday.
“US and Australian central banks are suggesting that they have cut rates far enough for now,” wrote Dominick Stephens, Westpac’s chief economist for New Zealand, in a note.
“However, we do expect the RBNZ will remain open to the possibility of future cuts, depending on how the data evolves,” he added.
Westpac now expects an easing in February.
The market now implies around a 57 per cent chance of a November easing, down from more than 80 per cent early this month.
Investors have also been lengthening the odds on a move from the Reserve Bank of Australia in the near term.
Futures imply almost no chance of a quarter-point cut in the 0.75 per cent cash rate at the RBA’s policy meeting next week, and only a 26 per cent probability of a move in December.
The RBA has repeatedly noted that the trend to lower rates by other major central banks had added to the pressure for cuts at home, so the Fed’s pause may give it some breathing room.