Aussie Dollar Holds Near 4-Year Top

The Australian dollar held its recent decline to below $0.72, but remained near four-year highs as markets weighed the collapse of plans for a second round of US–Iran peace talks. While President Donald Trump moved to extend the ceasefire, diplomatic momentum faded after Iran signaled it would not participate in negotiations. Tehran also indicated it would keep the Strait of Hormuz closed as long as US naval interceptions persist, and suggested it may not honor the ceasefire. The setback in diplomacy and rising Middle East tensions dampened risk sentiment, lifting the greenback through safe-haven demand. Domestically, focus remained on policy after RBA Deputy Governor Andrew Hauser reiterated the central bank’s commitment to anchoring inflation expectations. This reinforced bets of further tightening, with markets now pricing a 77% chance of a rate hike next month and another move likely by September. Investors now look to upcoming PMI data for clearer signals on economic momentum.

The Australian dollar hovered to around $0.71, trading near four-year highs as markets continued to monitor developments in the Middle East conflict. The ceasefire in the Iran war came under renewed strain after the US seized an Iranian cargo ship in the Gulf of Oman, prompting Tehran to threaten retaliation and reassert control over the Strait. Markets now focused on a second round of talks between the US and Iran as the current ceasefire nears its expiry. Iran is reportedly reconsidering participation, while President Trump signaled he may not extend the truce without a deal. The prolonged conflict has triggered a historic energy supply shock, fueling inflation risks and expectations of further central bank rate hikes. In Australia, a resilient labor market has already reinforced tightening bets, with markets pricing a 75% chance that the Reserve Bank will raise rates next month. Investors now await upcoming flash figures for PMI this week for further clues on the economy’s health.

The Australian dollar held above $0.71, sitting near its highest level since May 2022 and headed for its third straight weekly gain, supported by improving risk sentiment amid hopes for a potential de-escalation in the Middle East war. US President Trump continued to signal progress toward a deal with Iran, though the key details remain unconfirmed and the Strait of Hormuz continues to face disruptions, keeping energy prices volatile. Still, the Aussie has rebounded sharply amid the optimism, up over 5% from late-March lows triggered by the geopolitical tensions. Meanwhile, Australia’s labor market remained resilient in March, reinforcing bets that the Reserve Bank may continue tightening policy. Markets currently price in a 70% odds of a third consecutive rate hike in May, with upcoming Q1 inflation data seen as critical for the outlook. Adding support, solid first-quarter growth in China, driven by exports and policy support, has bolstered demand prospects for Australian commodities.