The Australian dollar (AUD) recently hit a 13-year peak against the New Zealand dollar (NZD), reaching NZ$1.2285 before easing slightly to NZ$1.2227. This surge, which saw the AUD jump 1% overnight against the kiwi, is primarily attributed to the widening policy gap between the RBA and the RBNZ. The AUD/NZD cross has gained approximately 2.41% over the past month and 9.82% over the past year.

The RBA is showing signs of continued hawkishness, with markets pricing in a 55% to 67% probability of a fourth interest rate hike this month, potentially reaching a terminal rate of 4.85%. This sentiment is bolstered by better-than-expected Australian economic data and inflation figures. Analysts like Paul Bloxham of HSBC now anticipate two RBA hikes this year, citing demand growth exceeding supply capacity.

In contrast, the RBNZ's recent rate hike to 2.75% was accompanied by dovish guidance, leading markets to expect a policy hold next month after two prior increases this year. Citi economist Faraz Syed maintains a dovish view on the RBNZ, predicting a terminal rate of 2.75% and anticipating a slowdown in activity that would prevent further hikes. This divergence in monetary policy makes Australian assets more attractive, contributing to the AUD's strength.

While the AUD/NZD cross reached a significant milestone, some analysts, such as those from Kapitales Research, note that a substantial portion of this rally is due to the NZD's weakness rather than a robust appreciation of the AUD. For instance, the NZD fell 0.82% against the US dollar in the same period, suggesting that the AUD's contribution to the cross's gain was closer to 0.25%. The kiwi also saw a 0.7% overnight drop against the US dollar to as low as $0.5802, its weakest since July 30, before bouncing slightly to $0.5863. The AUD, meanwhile, held steady at $0.7170 against the US dollar, having gained 0.3% overnight, with bulls targeting the August high of $0.7208.

In the broader market, both the AUD and NZD lost ground against a surging yen, with the AUD falling 0.7% to 113.05 yen and the NZD dropping 0.4% to 92.49 yen. This yen appreciation sparked suspicions of Japanese government intervention. The Australian dollar's ability to maintain its advantage will depend on incoming RBA signals, inflation, domestic activity, and external factors like China's economic performance and commodity markets.