The Australian dollar climbed to a three-month peak on Thursday while its New Zealand counterpart stood near its highest since February, largely due to a weakening US currency as investors wagered on policy tightening in Europe and Britain. The Australian dollar finally surpassed stubborn chart resistance around $0.7636 to hit a high of $0.7664, a level not seen since March 30.
The Aussie has been trudging higher since the beginning of June and is on track for its best monthly performance since January. Also supporting the currency is a bounce in the price of iron ore, Australia's single biggest export earner. The Dalian ore contract has rallied 14 percent from its lows in mid-June.
The weakness in the US dollar "reflects a growing expectation that quantitative easing outside the US may be on borrowed time as economic growth picks up and deflationary forces dissipate," John Higgins of Capital Economics said. European Central Bank President Mario Draghi sparked a euro rally on Tuesday, when he hinted that the ECB could trim its stimulus this year.
Bank of England Governor Mark Carney said on Wednesday that the central bank is likely to need to raise interest rates as the British economy comes closer to operating at full capacity. But "we are forecasting some broad-based rebound in the US dollar against other major economies in the second half of this year," said Higgins. "It reflects our view that the Fed will raise interest rates by more than investors are envisaging."