AUD\/USD fell on Thursday to about 0.7095, down 0.83% on the day. It had reached near 0.7185 on Wednesday, its highest level since June 2022.<\/p>\n
The drop followed renewed demand for the US Dollar as markets became more cautious. Tensions involving Iran, Israel and US forces increased risk aversion.<\/p>\n
Worries about Oil shipments through the Strait of Hormuz pushed energy prices higher. This lifted inflation concerns, supported US Treasury yields, and aided the US Dollar\u2019s safe-haven demand.<\/p>\n
US data also supported the US Dollar. Initial Jobless Claims were 213K versus a 215K forecast, and Housing Starts rose to 1.487M, above expectations.<\/p>\n
In Australia, rate expectations may help the Australian Dollar. Markets have increasingly priced in a 25 basis-point Reserve Bank of Australia hike at the March 17 meeting.<\/p>\n
TD Securities expects two rate rises by May, which could take the Cash Rate to 4.35%. A different policy path between Australia and the US may limit further AUD\/USD declines.<\/p>\n
Looking back at the analysis from early 2025, we saw a tug-of-war between a strong US dollar and a hawkish Reserve Bank of Australia. The market was correctly pricing in RBA rate hikes, which provided a floor for the Aussie dollar at the time. Today, with AUD\/USD trading much lower around 0.6650, the environment has completely flipped.<\/p>\n
The RBA did indeed hike its cash rate to 4.35% by mid-2025, but the economic landscape has since changed significantly. We have now seen three subsequent rate cuts, bringing the cash rate down to the current 3.60% in an effort to support a slowing economy. Australian quarterly GDP growth has slowed to just 0.2%, reinforcing the market’s expectation that the RBA’s next move is more likely to be another cut than a hike.<\/p>\n
In contrast, the US Federal Reserve is holding firm, with recent Core PCE inflation proving sticky at 2.8%, well above their target. Last week\u2019s Non-Farm Payrolls report showing the addition of 225,000 jobs has erased any near-term rate cut expectations in the US. This policy divergence now heavily favors the US dollar, a stark reversal from the situation we observed in early 2025.<\/p>\n
Geopolitical tensions are once again a dominant factor, mirroring the concerns from last year over the Strait of Hormuz. With Brent crude recently climbing back above $85 a barrel and the Cboe Volatility Index (VIX) rising to 17, safe-haven demand for the US dollar is strengthening. This renewed risk-off sentiment is adding significant pressure on risk-sensitive currencies like the Australian dollar.<\/p>\n
Given this backdrop, traders should consider buying AUD\/USD put options to position for further downside. Options with a strike price around 0.6500 for expiry in late April would offer a way to profit from a potential slide driven by policy divergence and risk aversion. This strategy defines our risk to the premium paid while providing exposure to the prevailing bearish momentum.<\/p>\n
However, we must remain watchful of key commodity prices, which were less of a factor during the risk-off environment in 2025. Iron ore prices have shown resilience, recently pushing above $115 per tonne. A sustained rally in Australia’s key export could provide unexpected support for the Aussie dollar and act as a hedge against our bearish positions.<\/p>\n
Create your live VT Markets account<\/a>\u00a0and\u00a0start trading<\/a>\u00a0now. <\/b><\/p>\n","protected":false},"excerpt":{"rendered":" AUD\/USD slid to 0.7095 as dollar demand rose on geopolitical tensions; Australia rate-hike bets limited downside.<\/p>\n","protected":false},"author":103,"featured_media":0,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[59],"tags":[],"class_list":["post-51336","post","type-post","status-publish","format-standard","hentry","category-live-updates"],"acf":{"acf_article_selection_author":null},"aioseo_notices":[],"_links":{"self":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51336","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/users\/103"}],"replies":[{"embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/comments?post=51336"}],"version-history":[{"count":0,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/posts\/51336\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/media?parent=51336"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/categories?post=51336"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.vtmarkets.com\/en-ca\/wp-json\/wp\/v2\/tags?post=51336"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}