The Australian dollar against the New Zealand dollar hits a 13-year high! Policy divergence between the Reserve Bank of Australia and the Reserve Bank of New Zealand intensifies, fueling interest rate differential trades.

Zhihu Tong Finance APP has noted that the Australian dollar rose to a 13-year high against the New Zealand dollar, mainly driven by diverging interest rate prospects between the two central banks and rising metal prices.

After Reserve Bank of Australia Assistant Governor Sarah Hunter stated that the central bank may have to raise interest rates again to contain inflationary pressures, the Australian dollar climbed as much as 0.4% against the New Zealand dollar to 1.2332 NZD, the highest level since April 2013.

Previously, Reserve Bank of New Zealand board member Prasanna Gai commented that the cash rate may already be within the neutral range.

This movement has extended the Australian dollar's gains against the New Zealand dollar this year to 6.2%, on track for its best annual performance in more than two decades, as traders bet that the policy rate gap between the two countries will widen further. According to swap agreement data, the market expects the Reserve Bank of Australia to raise rates at least once more this year, while the Reserve Bank of New Zealand may not have another opportunity to hike until February next year.

Additionally, the Australian dollar is being supported by rising prices for its main export metals, with iron ore rebounding above 100 USD per ton and copper reaching an all-time high.

Shaun Carol, Senior Analyst at ITC Markets in Sydney, said: "Short positions on AUD/NZD, previously built based on New Zealand's better performance due to its agriculture-driven export portfolio and held for a long period, are now likely being squeezed out by the Reserve Bank of Australia's hawkish shift, the Reserve Bank of New Zealand's lack of urgency for another hike, and the strong performance of commodities such as copper."