Aussie Dollar Holds Near 1-Month High

The Australian dollar held around $0.709, sitting near a four-week high amid rising hopes of a US-Iran peace deal, while investors weighed the Reserve Bank of Australia’s latest remarks. Deputy Governor Andrew Hauser stressed that inflation remains above the 2–3% target, and policymakers lack strong confidence that current interest rates are sufficiently restrictive. He noted that rates may need to rise further if necessary, particularly as the economy absorbs the inflationary impact of elevated oil prices tied to Middle East disruptions. Markets slightly raised the odds of a rate hike next month to 72% from 69% after Hauser’s remarks. First quarter inflation data, key labor market and consumer spending indicators are still due this month ahead of the decision. Meanwhile, the US and Iran signaled willingness to extend negotiations toward a longer-term ceasefire. This comes after prolonged weekend talks failed, prompting President Trump to announce a blockade on Iranian oil shipments.

The Australian dollar weakened to below $0.703, easing from a three-week high as collapse of US–Iran peace talks and escalation around the Strait of Hormuz triggered a risk-off mood globally and strengthened the US dollar. The move followed US plans to restrict shipping through the Strait after failed weekend talks with Iran, driving oil prices higher and intensifying global inflation risks. The surge in energy costs reinforced expectations that central banks may delay rate cuts or even tighten further. In Australia, the RBA has already raised rates twice this year to 4.10%, and markets expect another hike in May and see rates near 4.65% by year-end. Caution now built ahead of labor market data this week after unemployment unexpectedly rose to a three-month high. The Aussie’s year-long rally against the kiwi also showed signs of peaking after the RBNZ turned more hawkish. Traders now look to RBA Deputy Governor Hauser’s remarks for signals on whether policy remains as hawkish as peers.

The Australian dollar held above $0.707 on Friday, staying at a three-week high and on track for its strongest weekly gain since mid January as a two-week ceasefire in the Middle East conflict lifted global risk sentiment and weighed on the US dollar. Markets are now focused on upcoming diplomatic talks where US Vice President JD Vance is set to lead discussions in Islamabad this weekend. However, uncertainty lingered as Israeli strikes on Lebanon continued despite signals of potential direct negotiations, while disruptions in the Strait of Hormuz added concerns to global energy flows. President Trump also warned of possible escalation if ceasefire terms are not upheld, including concerns over Iran's attempts to impose charges on ships passing through the Strait. In Australia, the Reserve Bank has already raised rates twice this year to 4.10%, with inflation still stuck above their target range. Markets price a 60% chance of another hike in May and see rates near 4.65% by year-end.