The Australian dollar stood at two-year peaks and its New Zealand cousin held near a five-month top as the greenback wrestled with worries about the prospects for the Trump administration's economic agenda. The US currency was reeling from the collapse of the Republicans' push to overhaul healthcare, raising questions over President Donald Trump's ability to pass promised tax cuts and infrastructure spending.
The Australian dollar was at $0.7924, within a whisker of $0.7942 touched on Tuesday - a level not seen since May 2015. The Aussie also got a boost from an upbeat view of the economy by the country's central bank, leading investors to narrow the odds on a hike in interest rates. Technical analysts see the next chart target at $0.8000.
Across the Tasman Sea, the New Zealand dollar stood at $0.7348 having recovered all the ground lost to a surprisingly soft second-quarter inflation reading. It had gone as low as $0.7261 on Tuesday as traders pushed back expectations of the timing of a possible rate hike by the Reserve Bank of New Zealand. New Zealand government bond prices were mostly higher, with the 10-year yield down 4 basis points.
Australian government bond futures were mixed, with the three-year bond contract flat at 97.940. The 10-year contract rose 1.5 ticks to 97.2700. "The Reserve Bank of Australia's assessment has pushed AUD rates and yields higher against the global trend, widening its yield differentials. At this stage, it may not make too much sense speculating against the RBA," Morgan Stanley said in a note.