Aussie holds firm while Kiwi struggles after RBNZ surprise

The Australian dollar remained relatively firm on Thursday, October 29, while its New Zealand counterpart struggled to recover from the previous session's sharp losses, as diverging central bank policies continued to influence both currencies.

Stronger Australian inflation and the Reserve Bank of New Zealand's unexpected decision to leave interest rates unchanged have widened the gap between the two currencies.

Price overview

AUD/USD traded around $0.7055 in Thursday's morning session, up approximately 0.01%.

NZD/USD stood near $0.5622, down approximately 0.07%, while AUD/NZD hovered around NZ$1.2545, extending the Australian dollar's recent outperformance.

Australian inflation supports rate hike expectations

Australia's annual inflation accelerated to 4.3% in September, reinforcing expectations that the Reserve Bank of Australia will raise interest rates at its November 3 meeting.

The central bank has already increased borrowing costs four times this year, but persistent inflation suggests further tightening may be necessary.

Thursday's trade price figures showed Australian import prices declining 1.1% in the third quarter, while export prices rose 1.4%.

New Zealand dollar remains under pressure

The New Zealand dollar continued to suffer from Wednesday's unexpected decision by the Reserve Bank of New Zealand to maintain its benchmark interest rate at 2.75%.

The decision, approved by a narrow 4–3 vote, disappointed investors who had anticipated an increase.

Although policymakers indicated that further tightening remains likely, uncertainty over its timing has weakened the currency.

Federal Reserve outlook

The Federal Reserve left interest rates unchanged on Wednesday, maintaining its benchmark range at 3.75%–4.00%.

However, two policymakers favored an immediate increase, keeping expectations of further tightening alive.

Market outlook

The Australian dollar remains supported by expectations of higher domestic interest rates, while the New Zealand dollar faces continued uncertainty.

AUD/NZD could test resistance near NZ$1.2605, with support around NZ$1.2527.

The next major test will be the RBA's November decision, which could extend the divergence between the two currencies.