27.03.202602:08:20UTC+00Australian Dollar Hits 2-Month Low

The Australian dollar fell to around $0.687 on Friday, its lowest level in two months, as concerns over a prolonged energy shock stemming from the Middle East conflict darkened the global growth outlook and reduced demand for commodities. The earlier support from Australia’s relatively higher interest rates is starting to wane, with markets increasingly pricing in additional tightening by other major central banks, thereby eroding Australia’s yield advantage.

At the same time, a sharp rise in petrol prices is expected to feed into domestic inflation while putting further pressure on household spending. Economists warn that inflation could accelerate again, with headline CPI potentially climbing toward 4.5% in the near term and even approaching 5% in the second quarter if energy costs remain elevated. Earlier, RBA Assistant Governor Christopher Kent had already cautioned that a drawn-out conflict in the Gulf could dampen growth, even as the central bank remains focused on keeping inflation expectations anchored. Money markets currently imply a 68% probability of a rate hike in May and see the cash rate rising to around 4.75% by the end of the year.