Australian Dollar Rises to Four-Year High!
The Australian dollar strengthened above US$0.72 and reached a four-year peak on Thursday (May 7), supported by a weaker US dollar as markets increased expectations for a peace deal in the Middle East.
Pressure on the greenback emerged following reports that the US and Iran were moving toward a formal end to their conflict, potentially reopening the Strait of Hormuz and paving the way for further nuclear talks. Reduced safe-haven demand for the US dollar provided room for strengthening in riskier currencies, including the Australian dollar.
Domestically, sentiment was dampened by weaker-than-expected trade data. Australia recorded a goods trade deficit of AUD 1.84 billion in March, its first deficit in more than eight years, driven by a surge in imports of data center computing equipment and increased fuel shipments amid higher prices related to the Iran conflict.
Oil prices also acted as a transmission channel. The sharp drop in oil prices was seen as easing inflation concerns and lowering expectations that the Fed would need to maintain its highly restrictive policies for longer, which in turn added pressure on the US dollar.
The Australian dollar remains supported by policy support after the Reserve Bank of Australia raised interest rates this week, lifting the cash rate to 4.35%. The market now rates the chance of a further hike in June at around 20%, while a path to 4.60% in September remains fully priced in. (asd)
Source: Newsmaker.id
