Australian dollar hits six-month high on kiwi as rate outlook diverges

SYDNEY, Aug 28 (Reuters) - The Australian dollar hit a fresh six-month high on the kiwi on Thursday as investors bet on diverging rate outlook between the two, while they struggled to claw back much ground against their U.S. counterpart.

The Aussie hit a new high of NZ$1.1118 AUDNZD=R, with bulls now targeting a triple top level of $1.1173/77. If that level breaks, that would put the cross at the highest level since late 2022.

The pair has got a boost from Australian data on Wednesday showing consumer prices jumped by more than expected in July, dealing a blow to hopes of an imminent rate cut next month. For the remainder of 2025, markets imply just 34 basis points of additional easing from the Reserve Bank of Australia. 0#AUDIRPR

In contrast, New Zealand's central bank has turned surprisingly dovish, having cut rates to just 3% last week, as swaps imply two more moves to a terminal rate of 2.5%.

"The RBA is unlikely to complete ignore the July CPI report given there are signs that housing is losing its disinflationary impulse," said Prashant Newnaha, a senior rates strategist at TD Securities.

"The market implication is for the Australian curve to steepen less than offshore peers and for Australian to underperform ..., particularly at the front end vs the US and NZ."

Against the U.S. dollar, the Aussie AUD=D3 ticked up 0.1% to $0.6513, having edged 0.2% higher overnight to stand back above 65 cents, the middle of the recent trading range of between 64 and 66 cents.

That was helped by the weakness in the greenback as traders added to the bets for a U.S. rate cut in September after New York Fed chief John Williams signalled a cut was possible.

Local data showed Australian business investment edged higher in the June quarter as strength in data centres and logistics helped offset a pullback in mining.

The kiwi NZD=D3 was steady at $0.5855, having been little changed overnight. It is still stuck at the bottom of the recent trading ranges for the past few months, undermined by a dovish Reserve Bank of New Zealand.

Two-year swap rates NZDSM3NB2Y= fell another 3 basis points to 2.855%, about the lowest level since early 2022.