Australian dollar hits 12-week top as inflation rings rate alarm

The kiwi dollar was a shade softer at $0.5962 NZD=D3, after rising 0.3% overnight. It faces major resistance in the $0.5988/5993 zone and a breach would clear the way to this year's high of $0.6092.

The Reserve Bank of New Zealand meets next week, and markets imply a 90% chance it will lift the official cash rate 25 basis points to 2.75%, its second hike in a row. 0#NZDIRPR

Investors see rates reaching 3.0% by December and at least 3.25% early next year as the central bank shifts from outright stimulus to a more neutral policy stance.

"The RBNZ's projections are likely to imply a 3% OCR by year-end, the same as in May," said Kelly Eckhold, chief NZ economist at Westpac.

"We see the RBNZ being equivocal about the potential for an October increase," he added. "They seem likely to adopt a data-dependent approach to determining whether to continue raising rates in October, given they will be close to the 3% neutral rate level the RBNZ often emphasises."