Aussie Dollar Eyes Small Weekly Gain

2026-05-08 00:49 By Joshua Ferrer 1 min. read

The Australian dollar held around the $0.72 level after retreating in the previous session, as renewed Middle East tensions trimmed its weekly advance.

The currency is headed for only a modest 0.3% weekly gain, as renewed clashes between the US and Iran weakened hopes for a near-term peace agreement, boosting demand for the safe-haven US dollar.

The latest escalation followed US attempts to exit a conflict now in its third month, while awaiting Iran’s response to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows.

The near-closure of the strait and the resulting energy price shock have fueled concerns about rising inflation, which could keep interest rates higher for longer.

In Australia, markets are pricing around just a 20% chance of another rate hike in June by the Reserve Bank, after 75bps of tightening to 4.35% over the past three meetings.

The probability rises to about 68% for August, with a terminal rate near 4.6% almost fully priced in by September.



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Aussie Dollar Eyes Small Weekly Gain
The Australian dollar held around the $0.72 level after retreating in the previous session, as renewed Middle East tensions trimmed its weekly advance. The currency is headed for only a modest 0.3% weekly gain, as renewed clashes between the US and Iran weakened hopes for a near-term peace agreement, boosting demand for the safe-haven US dollar. The latest escalation followed US attempts to exit a conflict now in its third month, while awaiting Iran’s response to its proposal to reopen the Strait of Hormuz, a vital waterway for energy flows. The near-closure of the strait and the resulting energy price shock have fueled concerns about rising inflation, which could keep interest rates higher for longer. In Australia, markets are pricing around just a 20% chance of another rate hike in June by the Reserve Bank, after 75bps of tightening to 4.35% over the past three meetings. The probability rises to about 68% for August, with a terminal rate near 4.6% almost fully priced in by September.
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The Australian dollar rose above $0.72, reaching a new four-year peak as growing expectations of a Middle East peace deal weakened the safe-haven US dollar, while disappointing domestic trade figures weighed on sentiment. Australia unexpectedly recorded a goods trade deficit of AUD 1.84 billion in March, its first in over eight years, as imports of data centre computing equipment surged, while fuel shipments also jumped on higher prices driven by the Iran conflict. Elsewhere, the greenback remained under pressure after reports that the US and Iran are moving toward formally ending the conflict, potentially reopening the Strait of Hormuz and paving the way for further nuclear talks. The Aussie also continued to benefit from a rate hike this week from the Reserve Bank of Australia, which lifted the cash rate to 4.35%. Markets now see only a 20% chance of another move in June after three rate hikes this year, while a further increase toward 4.60% by September remains fully priced.
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The Australian dollar climbed to above $0.72, hitting a fresh four-year high after the Reserve Bank delivered a widely expected quarter-point rate hike to 4.35%, while risk appetite strengthened on signs of de-escalation in the Middle East conflict. Often seen as a proxy for global risk, the Aussie gained as global equities rallied after the US declared an end to offensive operations against Iran and temporarily paused efforts to assist stranded vessels leaving the Strait of Hormuz. The upbeat tone also pressured the safe-haven US dollar, alongside a sharp rise in the yen amid talks of intervention from Japanese authorities. Meanwhile, the RBA extended its tightening cycle to a third straight meeting, reinforcing its commitment to returning inflation to the 2–3% target. Markets now see only a 20% chance of another move in June after three rate hikes gave policymakers room to assess developments in the Iran war, while a further increase toward 4.60% by September remains fully priced.
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