Australian dollar heads for best week since June as outlook brightens

The Aussie dollar hit a nine-month high against the US greenback. It's shaping up to be its strongest weekly showing since June. Why? Disappointing US economic numbers have made multiple Fed rate cuts look more likely. The charts look good too.

Against the yen, the Aussie reached a six-month peak Friday. It's also surging against the euro and Canadian dollar.

Several things are driving this rally. Booming stock markets. Nice yield spreads. The RBA's cautious approach to cuts. Higher commodity prices. Stable politics. Pretty solid fiscal position too.

"This isn't just about risk appetite," a currency analyst pointed out. "We're seeing all kinds of traders jump in - tactical players who like the Aussie's appeal right now and momentum investors riding the wave of its impressive performance."

The currency touched $0.6835 on Friday. It jumped 0.8% a day earlier, breaking through the $0.6790 resistance level. Kind of surprising how quickly it gained momentum after that breakthrough. Bulls seem to have their eyes on December's $0.6875 mark next.

For the week, it's up 1.8%. That puts it among the G10's top performers.

Recent US data isn't great. Manufacturing contracted. Jobless claims rose. Seems like the Fed will cut rates twice more after next week's expected quarter-point move.

The RBA? Not so fast. Strong economic indicators at home have markets doubting quick cuts. The odds of a December cut to 3.10% have dropped to 70%, down from 95% not long ago.

This policy split has widened the Australia-US 10-year yield gap to about 22 basis points. It was -15 points in late July.

The Kiwi dollar hasn't been as lucky. It's held back by ongoing economic weakness and a dovish central bank. It's sitting at $0.6125 after gaining 0.7% overnight. Weekly gain: 1.4%.

New Zealand jobs data comes Tuesday. Not entirely clear how it might affect the RBNZ's next move, though they've already signaled more easing this year.

NZ retail sales grew 0.8% in September - fourth monthly rise in a row.

"Things are looking up for the December quarter," a senior economist noted, "especially after what was probably a tough September quarter."