Aussie Pressured Near 1-Month Low

The Australian dollar rose to around $0.692, but remained near a one-month low as investors weighed fresh developments in the Middle East war. Reports suggest the US, Iran, and regional mediators are discussing terms for a potential 45-day truce that could open the door to a broader de-escalation. This tentative optimism follows President Trump issuing a renewed ultimatum and stepping up threats against Iran’s civilian infrastructure if the Strait of Hormuz is not reopened, a demand Tehran has so far rejected, keeping the vital shipping route effectively constrained. For Australia, expectations for tighter policy continue to build, with markets leaning toward another rate hike at the May meeting as elevated oil prices and a still-tight labor market sustain inflation pressures. Analysts expect the Reserve Bank of Australia to deliver up to three additional hikes in 2026, potentially lifting the cash rate to 4.85%, a level last seen in late 2008.

The Australian Dollar was little changed to around $0.691 on Friday amid thin holiday trading volumes, but on track for a modest weekly rise on hopes of de-escalation in the Middle East war and that the Strait of Hormuz could partially reopen. Reports showed that Iran and Oman are drafting a protocol to monitor tanker traffic through the key oil-shipping route, which has been effectively shut since the start of the war. The plan would place transit under joint supervision and could require ships to pay tolls to Tehran. Meanwhile, President Trump’s latest speech offered little clarity on a swift end to the Iran conflict, though he has previously set a two-to-three-week timeline for ending the war. He also issued fresh threats on Iranian infrastructure in a bid to pressure Tehran in negotiations. In Australia, higher energy costs are already set to lift inflation, forcing downgrades to growth forecasts and raising expectations of further rate hikes as stagflation risks increase.

The Australian dollar fell below $0.693 on Thursday, slipping back toward two-month lows as the US dollar firmed and oil prices rose after President Trump’s remarks on the Iran war. Trump said Washington’s core objectives in the conflict were close to being achieved but gave no clear timeline for ending the war, while warning that the US could still strike Iran “extremely hard” over the next two to three weeks. Hopes of an imminent end to the month-long conflict had earlier supported global equities and weighed on the dollar, but his remarks reversed sentiment, sending stocks lower again. Meanwhile, strong domestic trade data limited the downside. Data showed Australia’s trade surplus more than doubled in February, marking the largest in seven months as gold and farm exports jumped, while imports of gold and data processing equipment eased. Elsewhere, tariff concerns resurfaced as the Trump administration prepared a 25% levy on finished goods containing imported steel and aluminum.