The Australian dollar rose above 94 US cents after the Reserve Bank of New Zealand increased its cash rate.
After the RBNZ decision at 0700 AEST, the Australian currency peaked at 94.12 US cents, its highest level since April 14.
At 0750 AEST on Thursday, the local unit was trading at 93.87 US cents, up from 93.81 cents on Wednesday.
The New Zealand dollar peaked at 86.28 US cents, which was a three week high.
The cash rate move was widely expected and it was the third time in four months that the RBNZ raised the rate.
Governor Graeme Wheeler decreased their economic growth forecasts for the year to March 2015 to 2.7 per cent from 3.2 per cent.
National Australia Bank global co-head of foreign exchange strategy Ray Attrill said it appeared the RBNZ was still willing to increase its interest rate further, but inflationary pressure was still a problem.
“Overall, the message seems to be that New Zealand dollar strength is not going to be a major impediment to getting the OCR back up to and through a neutral level,” he said.
Before the RBNZ decision the Australian dollar was holding steady after Wall Street stocks ended a four day streak of record highs.
Attrill said increased political tensions between Russia and the Ukraine and a warning from the International Monetary Fund urging action to prevent another housing prices crash also weighed on market sentiment.
Local jobs figures will be released on Thursday, with the unemployment rate is forecast to rise to 5.9 per cent in May and 10,000 news jobs are expected to be added to the economy in the month.
AAP
