The Australian dollar held onto recent gains near $0.703, trading around a three-week high as investors assessed the stability of the ceasefire agreement in the Middle East. Iranian media reported a suspension of oil tanker traffic through the Strait of Hormuz following renewed Israeli strikes in Lebanon, while Tehran claimed elements of the proposed truce had already been violated.
At the same time, US Vice President JD Vance indicated that conditions may soon permit the reopening of the key shipping corridor, ahead of his visit to Islamabad for direct talks with Iranian officials. The conflict, now in its second month, has driven energy prices higher and heightened inflation risks, bolstering expectations that global central banks may keep monetary policy tighter for longer.
In Australia, the Reserve Bank has already raised interest rates by 50 basis points to 4.1% in response to persistently high inflation. Money markets are currently assigning roughly a 55% probability to another rate increase in May, down from about 70% a week earlier, but still anticipate the cash rate reaching around 4.61% by year-end.
