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The dollar wallowed near a five-month trough against major peers on Wednesday as Federal Reserve insistence that stimulus will continue kept yields low, while surprisingly hawkish New Zealand central bank comments pushed the kiwi higher.

The euro traded just north of the key $1.2250 level — holding gains from Tuesday when it pushed as high as $1.2266 for the first time since Jan. 8 — as Europe’s pandemic recovery gathers pace.

The dollar index , which gauges the greenback against six rivals, languished at 89.617 in Asia, after pushing as low as 89.533 on Tuesday.

The Chinese yuan strengthened past 6.4 per dollar in onshore trading for the first time since June 2018, while its offshore counterpart pushed to a fresh three-year high at 6.3858.

New Zealand’s currency jumped after the central bank hinted at a potential interest rate hike by September next year in its monetary policy statement. The kiwi last traded 1.1% higher at $0.73072.

“There are now several central banks that appear to be closer to a tightening cycle than the Federal Reserve, and markets are sensing that,” said Imre Speizer, Westpac’s head of New Zealand strategy. He identified the currencies of New Zealand, Canada and Norway as driven by aggressive central bank expectations.

Following the RBNZ’s “hawkish surprise,” Speizer said he may revise up his forecast for the kiwi to finish the year at $0.76.

That contrasts with a host of Fed officials who overnight echoed the sentiments of Chair Jerome Powell that a spike in inflation will be transient and ultra-easy policy continues to be warranted.

“I have not seen anything yet to persuade me to change my full support of our accommodative stance,” Chicago Fed President Charles Evans said in a speech on Tuesday. read more

“Right now, policy is in a very good place,” San Francisco Fed President Mary Daly told CNBC the same day. “We need to be patient.” read more

A potential test of that conviction comes Friday, with new readings on U.S. core consumer prices and a survey of purchasing managers.

The yield on benchmark 10-year Treasury notes hovered at 1.5740%, not far from the 1.5540% mark reached overnight for the first time since May 7’s payrolls shock.

The yen , which is also sensitive to declines in yields, hovered around the middle of its approximately 108.4-109.7 per dollar trading range this month, last changing hands at 108.795.

The dollar has declined over the past two months on the belief that low U.S. rates will drive cash abroad to capture gains now that other economies are beginning to recover more quickly from the pandemic.

“Confidence in the outlook for the recovery in the Eurozone has been increasing,” Rabobank strategist Jane Foley wrote in a report. “This is underpinning market speculation that the topic of tapering with respect to the pace of asset purchases will be on the table at the forthcoming June 10 ECB meeting.”

The onshore yuan strengthened as far as 6.3943 per dollar on Wednesday, piercing the psychological 6.40 boundary for the first time since mid-2018.

A day earlier, it had held that level amid buying by China’s major state-owned banks in a move viewed as an effort to cool the rally, sources said.

“Amid conflicting reports from Chinese officials in recent days about their attitude to the currency, our read here is that 6.40 is not a hard line in the sand, and that in the context of further downward pressure on the USD more generally, it will be ‘allowed’ to trade lower,” National Australia Bank strategist Ray Attrill wrote in a report, reiterating a forecast for 6.35 yuan per dollar by end-June.

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Currency bid prices at 411 GMT

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