Australian Dollar Pressured at 2-Month Low

The Australian dollar held below $0.71 after dropping nearly 2% in the previous week to hit a two-month low, pressured by a stronger US dollar. A robust US labor market report reinforced expectations that the Federal Reserve will raise interest rates this year, boosting the greenback more than 1% last week. Rising tensions in the Middle East and a fragile peace deal between the US and Iran also supported the safe-have currency, which further weighed on the risk-sensitive Aussie. Meanwhile, a slightly hawkish tone from the Reserve Bank of Australia could help cushion more losses in the AUD. RBA Governor Michele Bullock reiterated last week that the central bank remains firmly focused on bringing inflation down, following three rate hikes earlier this year that lifted the cash rate to 4.35%. She also noted that inflation remains too elevated, stressing that the board will take whatever measures it deems necessary to fulfill its mandate of achieving price stability and full employment.

AUDUSD decreased to 0.71, the lowest since April 2026. Over the past 4 weeks, Australian Dollar US Dollar lost 2.13%, and in the last 12 months, it increased 9.12%.

The Australian dollar fell to around $0.711, touching a two-week low and on track for a weekly drop of roughly 1%, as an ongoing stalemate in Middle East tensions weighed on risk appetite, while the Reserve Bank signaled a wait-and-see approach. The central bank has already delivered three hikes this year, and Governor Michele Bullock said the rate increases are starting to filter through the economy. However, she reiterated that inflation remains elevated and policymakers will remain alert to persistent price pressures. Markets expect the RBA to stand pat in June, with about a 50% odds of another hike in August and full pricing for a move by December. Investors now watch any shift in tone as Deputy Governor Andrew Hauser is due to speak later today, although expectations are he will reinforce a steady policy stance. Broader sentiment was further hit by a fragile US-Iran ceasefire, reports of stalled negotiations, and a pullback in AI-linked trades, weighing on the risk-sensitive AUD.