Aussie hits four-year peak on Australian rate hike prospects

The Australian dollar rose broadly in the Asian market on Thursday against a basket of global currencies, extending its gains for the fourth consecutive day against its American counterpart and hitting a four-year high, benefiting from the decline in the levels of the American currency in the foreign exchange market.

The currency was supported by strong expectations that the Reserve Bank of Australia (RBA) will raise interest rates during its upcoming May meeting, especially after the release of significant data in Australia showing labor market resilience despite the pressures of the "Iranian war" and rising energy costs.

Price Overview

- Australian Dollar Exchange Rate Today: The Australian dollar rose against its American counterpart by 0.45% to (0.7198), the highest since June 2022, from today's opening price of (0.7165), and recorded a low of (0.7163).

- The Australian dollar ended Wednesday's trading up by 0.6% against the U.S. dollar, marking its third consecutive daily gain amid positive risk sentiment and U.S. stocks climbing to new record highs.

The U.S. Dollar

The dollar index fell on Thursday by more than 0.2%, deepening its losses for the ninth consecutive session and recording a six-week low of 97.83 points, reflecting the continued drop in the levels of the American currency against a basket of major and minor currencies.

Optimism has increased in the markets regarding the probability of the United States and Iran reaching a peace agreement, prompting investors to reduce their holdings of the American currency as a safe haven and move toward higher-risk assets.

U.S. President Donald Trump stated that the U.S.-Israeli war on Iran is "about to end," while the White House expressed optimism about the possibility of reaching a deal, noting the likelihood of additional rounds of direct talks in Pakistan.

Khoon Goh, head of Asia research at ANZ Bank, said: Markets are now essentially ignoring the conflict and expecting some kind of settlement. Goh added: With markets pricing out the impact of the war, we may see more pressure on the dollar and a resumption of the downward trend that began roughly last year.

Australian Data

Significant economic data released today in Sydney showed:

- The unemployment rate remained stable at 4.3% in March, aligning perfectly with market expectations and the Reserve Bank of Australia (RBA).

- The Australian economy added 17,900 new jobs in March, very close to the forecast of 20,000 jobs.

- Full-time employment saw a qualitative jump, adding 52,500 jobs in March after losing 27,700 jobs in February.

- The consumer inflation expectations index for April recorded an increase to 5.9% compared to 5.2% in the previous month. This reading for inflation expectations is the highest since late 2022, increasing pressure on the RBA.

The Chinese Economy

The Chinese economy—the largest trading partner of the Australian economy—recorded strong growth at a rate of 5% in the first quarter of 2026, exceeding analyst expectations of 4.8%, after recording growth of 4.5% in the final quarter of last year.

Australian Interest Rates

- Following the above data, the pricing of the probability of the Reserve Bank of Australia raising interest rates by about 25 basis points in May rose from 55% to 70%.

- In order to re-price those probabilities, investors await the release of more data on the levels of inflation, unemployment, and wages in Australia.

- The Reserve Bank of Australia has raised interest rates twice this year to 4.1%, as a result of the impact of the U.S.-Israeli war on Iran on global oil trade and rising fuel prices across the country.