The Australian dollar hovered around $0.703 on Friday, remaining volatile and heading for its first weekly decline since mid-January, as global risk sentiment deteriorated amid escalating tensions in the Middle East. The US-Israeli conflict with Iran has entered its seventh day, pushing oil prices higher on supply concerns and rekindling fears of persistent inflation. At the same time, President Donald Trump asserted the right to influence Iran’s next leader, while the US House rejected an effort to halt his air campaign.
Rising energy prices and elevated geopolitical risk have bolstered the US dollar and driven a reassessment of interest rate expectations for major central banks. In Australia, debate continues over a possible rate hike in March, as markets consider how higher energy costs and global uncertainty might affect inflation and growth. Markets currently assign about a 30% probability that the RBA will raise its 3.85% cash rate at the March 17 board meeting, while a move to 4.10% in May is fully priced in.
