The Australian dollar climbed to a multi‑year high on Thursday, buoyed by firm labor data, stronger commodity prices, and a broader shift toward risk‑sensitive assets amid tentative diplomatic progress in the Middle East.
The currency briefly touched levels near 0.7200 against the US dollar before easing to around 0.7170 in European trading. Overall, it gained about 0.30% on the day, led by strength against the New Zealand dollar, a 0.05% rise versus the US dollar and a 0.18% advance against the euro.
Risk appetite lifts aussie as ceasefire hopes grow
The move came as global markets tilted toward riskier assets on expectations of further progress in potential United States–Iran ceasefire talks.
S&P 500 futures extended gains in European trade, reflecting the improved tone. At the same time, the US dollar index reversed early weakness to trade 0.1% higher near 98.15, indicating only modest support for the greenback as markets balanced optimism with ongoing geopolitical risks.
In Washington, Press Secretary Leavitt signalled on Wednesday that additional rounds of discussions between the United States and Iran were likely, possibly in Pakistan. Officials in Islamabad later said they had no confirmed information on a venue for any upcoming talks.
The broader backdrop remains tense. A US naval blockade in the Strait of Hormuz is restricting trade with Iran, while Tehran has reportedly proposed allowing vessels to use the Omani side of the strait as a workaround. The uncertainty is preserving demand for traditional safe‑haven assets, even as risk appetite improves.
Domestic labor data steady but inflation pressures intensify
Australia’s March labor report showed a solid if slightly softer pace of hiring. The economy added 17,900 jobs, just below expectations of 20,000 and down from 49,700 previously. The unemployment rate was unchanged at 4.3%, in line with forecasts.
Beneath the steady jobs picture, price pressures are building. Consumer inflation expectations for April jumped to 5.9%, up sharply from 5.2% in March and the highest reading since November 2022. The move comes after annual inflation ran at 3.7% in February, still above the Reserve Bank of Australia’s 2–3% target band.
Deputy Governor Andrew Hauser recently warned that inflation remains above target and that current interest rates may not be restrictive enough to bring it under control. Money‑market pricing now implies around a 64% chance the RBA will lift its cash rate to 4.35% at its May meeting.
Commodity surge provides powerful support
A renewed surge in export prices is providing a key tailwind for the Australian dollar.
The index of commodity prices rose 12.8% year‑on‑year in March, the fastest pace since January 2023. Gains in gold, lithium and coking coal more than offset weaker iron ore prices, reinforcing Australia’s terms of trade and supporting the currency.
Demand prospects are being underpinned by stronger‑than‑expected activity in China, Australia’s largest trading partner. China’s economy grew 5.0% year‑on‑year in the first quarter of 2026, up from 4.5% in the previous quarter and ahead of market forecasts. The data suggest continued robust appetite for raw materials, helping to bolster the outlook for Australian exports.
Policy divergence with the United States in focus
While markets increasingly price in the risk of further tightening by the RBA, the policy stance in the United States looks more stable.
The Federal Reserve is widely expected to keep its benchmark rate on hold in a 3.50%–3.75% range at its next meeting. Cleveland Fed President Beth Hammack has argued for patience, indicating the central bank should maintain current settings while assessing how the economy responds to elevated energy prices and tariff‑related headwinds.
This emerging policy divergence, combined with strong commodity prices, firm Chinese demand and persistent domestic inflation, is helping to underpin the Australian dollar even as the greenback retains some support from safe‑haven flows linked to Middle East tensions.
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