Australian dollar extends gains on upbeat sentiment
The Australian dollar advanced on Wednesday, rising 0.23% to around 0.7137 against the US dollar in early European trading and edging closer to its multi‑year high near 0.7190. The move tracked a broader shift toward risk‑sensitive assets amid renewed hopes for a permanent ceasefire between the United States and Iran.
Market data showed the Australian dollar gaining the most against the Japanese yen, up 0.29%, with smaller advances against other major currencies. The US Dollar Index slipped toward 98.10, hovering near a seven‑week low and reinforcing support for higher‑yielding currencies.
Futures on the S&P 500 were broadly steady around 6,970, holding on to the prior session’s gains and underscoring the risk‑on tone.
Trump comments fuel ceasefire optimism and uncertainty
President Donald Trump said he expected Washington and Tehran could finalize a lasting truce within two days, following an earlier two‑week ceasefire. He argued that a resolution was close and said he saw no need for further temporary extensions.
However, he also remarked that he was not considering prolonging the current ceasefire, even as he signaled that talks to end the conflict could resume in Pakistan in the coming days. The last negotiation round in Islamabad ended over the weekend without a deal, and the existing two‑week truce is due to expire on April 21.
RBA warning on stagflation risks in Australia
Against this fragile geopolitical backdrop, Reserve Bank of Australia Deputy Governor Hauser warned that the country may be heading into a difficult period marked by persistent inflation and an energy crunch tied to Middle East tensions.
Hauser’s comments highlighted the risk of stagflation — weak growth combined with high inflation — describing it as a “central banker’s nightmare.” Policymakers could be forced to choose between raising interest rates to tame prices at the cost of deepening a slowdown, or cutting rates to support growth while allowing inflation to run higher.
He pointed to surging fuel costs as a major income shock for Australia, which he noted is the world’s highest user of diesel per capita.
Technical picture favors further AUD/USD upside
In technical trade, AUD/USD hovered near 0.7140 at press time, holding above its 20‑day exponential moving average at 0.7023. The relative strength index sat at 63.3, signaling solid positive momentum without yet entering overbought territory.
Analysts see a break below 0.7023 as a potential trigger for deeper losses toward 0.6935, an area where prior demand has previously stabilized prices. As long as the pair remains above its short‑term averages, the bias stays tilted toward another test of the 0.7200 region.
US dollar under pressure despite global dominance
The softer US dollar has eased global financial conditions, typically supporting assets priced in the currency and bolstering returns in international equities and other risk‑oriented markets when capital rotates out of traditional safe havens.
According to the Bank for International Settlements’ 2025 survey, average daily turnover in global foreign exchange markets has reached $9.6 trillion. The US dollar was on one side of 89.2% of all trades, up from an 88.4% share in 2022 and underscoring its central role in global currency dealings.
The greenback’s value remains closely tied to decisions by the Federal Reserve. When inflation runs above the 2% target, rate increases tend to support the currency, while rate cuts generally weigh on it. Beyond interest rates, the Fed also uses tools such as asset purchases and bond roll‑offs to manage liquidity, influencing dollar performance across markets.
Fed holds steady as markets price in policy pause
In contrast to Australia’s rising stagflation concerns, the US policy stance appears more stable. At its March meeting, the Federal Reserve kept its target rate unchanged in a 3.50%–3.75% range.
Market pricing suggests more than a 97% probability that the Fed will leave rates on hold again at its late‑April meeting, signaling a steady approach for now even as global traders adjust to a weakening dollar and shifting risk appetite.
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