The Aussie tore to a 29-year peak against a depressed US dollar on Wednesday, while debt futures slumped as an alarmingly high inflation report put a rate hike back on the agenda for this year. The Aussie shot up more than a cent to $1.1063, cracking the May top of $1.1012 and the highest since 1982 when the currency was still managed. It last traded at $1.1054, ahead of barriers at $1.1093, then $1.1110.
--- NZ dollar at 30-year summit
"It's a cracker of a day for the Aussie," said Joseph Capurso, strategist at Commonwealth Bank in Sydney. He forecast the Aussie at $1.12 by the end of the week, or early next, as long as volatility stays low and the US congress doesn't deliver a decent plan for its debt ceiling. US lawmakers have one week left to hash out a deficit-cutting plan and to raise the legal $14.3 trillion debt limit. Against the euro, the explosive Aussie pierced through a two-week peak of $1.3135 . It gained 0.8 percent and is on the verge of breaking six-month highs. The local dollar also surged 0.7 percent to a three-week peak of 86.05 yen. The latest spike came after government data showed underlying inflation climbed an alarming 0.9 percent in the second quarter, well above forecasts of 0.7 percent and intensifying pressure for another rate hike.
Across the Tasman sea, the kiwi also scaled a fresh 30-year high of $0.8765, dragged up by the Aussie rally. It gained 0.5 percent and last traded at $0.8756. Support for the kiwi is seen from the July 25 high of $0.8678 with $0.88 noted as the next topside target.
The kiwi was also helped on Wednesday by a survey showing a rise in business confidence in July, as inflation expectations eased slightly. Against the kiwi, the Aussie leaps to a two-week highs of around NZ$1.2669, up 0.6 percent. Last week, it touched a near 12-month low of NZ$1.2471 on the divergent market rate outlook.