The Australian dollar held above $0.71, hovering near its highest level since May 2022 and headed for a third consecutive weekly gain, underpinned by improving risk sentiment on hopes of a possible de-escalation in the Middle East conflict. US President Trump has continued to signal progress toward a deal with Iran, though key details remain unconfirmed and disruptions in the Strait of Hormuz persist, keeping energy prices volatile. Even so, the Aussie has rebounded sharply amid the improved mood, gaining more than 5% from its late-March lows that were driven by geopolitical tensions.
At the same time, Australia’s labor market remained resilient in March, reinforcing expectations that the Reserve Bank may continue tightening monetary policy. Markets are currently pricing in a 70% probability of a third consecutive rate hike in May, with upcoming Q1 inflation data viewed as critical for the policy outlook. Further support for the currency has come from solid first-quarter growth in China—underpinned by exports and policy measures—which has strengthened demand prospects for Australian commodities.
