Australian dollar hits three-year peak on rate-hike bets

By Wayne Cole

SYDNEY, Feb 11 (Reuters) - The Australian dollar climbed to a fresh three-year peak on Wednesday as the central bank signalled hawkish policy again, while the greenback came under pressure from softer U.S. economic data.

The Aussie climbed 0.7% to reach $0.7122 AUD=D3, the first break above the 71-cent barrier since early 2023. The next chart target is a top from early 2023 at $0.7158 and then $0.7282.

It also struck an 11-month top on the euro at 0.5576 AUDEUR=R and a nearly 13-year high on the New Zealand dollar.

The Aussie strengthened after Reserve Bank of Australia Deputy Governor Andrew Hauser said inflation remains high and the economy was hitting capacity constraints, reinforcing investor speculation that further policy tightening might be needed.

The RBA hiked its cash rate a quarter point to 3.85% last week and markets imply around a 70% chance rates will rise to 4.10% at the RBA's meeting in May, following the release of first-quarter inflation figures. 0#AUDIRPR

Adding to the case for a rate hike, data on Wednesday showed mortgage lending jumped an outsized 9.5% in the fourth quarter, while investment loans climbed to a record, suggesting financial conditions were looser than the RBA expected.

The kiwi dollar was firm at $0.6059 NZD=D3, having gained 0.3% so far in the session. Resistance remains at recent high of $0.60925 and the 2025 peak at $0.6120.

The Reserve Bank of New Zealand will meet next week and is considered certain to leave rates at 2.25%, having cut by a total 225 basis points over the past year or so.

Investors will focus on the central bank's cash rate projections and whether a first hike is still expected in mid-2027. Markets currently price a 75% chance of a September increase, with a move to 2.5% fully priced for October.

Kelly Eckhold, chief NZ economist at Westpac, expects the first hike in December but sees enough signs of activity accelerating to suggest spare capacity in the economy will be used up by early 2027.

"Hence, we have revised up our view of how quickly the RBNZ will lift the OCR over 2027," said Eckhold. "We expect a standard cycle where the OCR is raised by 25bp at each meeting from February to September, and peak at 4.25% in early 2028."