FX.co ★ Australian Dollar Holds Losses

The Australian dollar hovered near $0.698, extending its recent pullback from a three-week high as the intensifying US-Iran conflict pressured risk assets. Demand for the safe-haven US dollar strengthened, while oil prices rose after hostilities broadened from purely military targets to key infrastructure. Shipping through the Strait of Hormuz has largely stalled, with the US enforcing a naval blockade on Iranian ports and Iran targeting vessels. The resulting threat to energy supplies has revived concerns that renewed inflationary pressures could complicate the policy outlook for major central banks.

In Australia, expectations for additional monetary tightening remained muted, with markets pricing roughly a 70% probability of one final rate hike by December. Some investors anticipate that the Reserve Bank of Australia could begin cutting rates next year. Traders are now focused on upcoming labour market data and flash PMI releases later this week for further insight into the strength of the Australian economy.