Australian dollar falls 1% to 0.7006 against US currency

The Australian Dollar (AUD) fell 1% against the US Dollar (USD) on Thursday, trading at 0.7006 after briefly slipping below the key 0.7000 level earlier in the session according to market data. The decline follows renewed risk-averse sentiment driven by escalating tensions in the Middle East, with safe-haven demand bolstering the USD. The US Dollar Index (DXY) rose 0.8% to 99.40, its highest level in over a month.

The Reserve Bank of Australia (RBA) has maintained a hawkish stance, raising rates to 3.85% in February—the first increase since late 2023—and signaling potential further tightening at its March meeting. Governor Michele Bullock highlighted risks of inflationary pressures from rising energy prices amid geopolitical instability. Markets currently price a 30% probability of a March rate hike and anticipate a move to 4.10% by May.

On the US side, Federal Reserve officials remain divided on additional rate hikes, though expectations for cuts later in 2026 persist. The USD's strength is also supported by sticky inflation data and geopolitical uncertainties, including disruptions in the Strait of Hormuz.

Technically, AUD/USD remains above key moving averages, with immediate support at 0.6960 and resistance at 0.7045. Upcoming data, including Australia's Services PMI and Q4 GDP report, may influence the RBA's policy trajectory. Investors will also monitor China's PMI figures, given Australia's trade exposure.

The pair's volatility reflects a delicate balance between domestic tightening prospects and global risk dynamics, with further fluctuations likely as tensions and economic data evolve.