The Australian dollar held hefty gains on Thursday after the United States' top Treasury official said a weaker US currency was good for the country, giving a green light to speculative sellers across the globe. The New Zealand dollar, however, was stripped of all its gain after domestic inflation came in well below expectations, quashing any thought of a rise in interest rates this year.
The Aussie was up at $0.8065, having spiked almost a full cent overnight to a four-month peak of $0.8083. The jump finally shattered resistance in the $0.8030/40 zone that had held bulls back for most of the past week. The next major targets are the double top of $0.8105 and $0.8125 from September last year.
The New Zealand dollar had shot as high as $0.7435 overnight only to come crashing back to earth when local inflation data badly missed forecasts. The currency was last at $0.7349. The data also badly wrongfooted investors who had been shorting the Aussie for the kiwi, sending the former flying to NZ$1.0970 from NZ$1.0862. New Zealand government bonds rallied sharply with two-year yields falling 7 basis points.
The consumer price index rose only 0.1 percent in the fourth quarter, when analysts had looked for an increase of 0.4 percent. That left annual inflation at a one-year low of 1.6 percent, making it all the harder for the Reserve Bank of New Zealand to reach the middle of its 1 to 3 percent target band. The breakout came after US Treasury Secretary Steven Mnuchin broke with years of tradition by abandoning a strong US dollar mantra and welcoming a weaker currency.