Philip Wee at DBS Group Research highlights that the Australian Dollar has outperformed in G10 despite the Iran conflict. He attributes AUD strength to Reserve Bank of Australia policy divergence and a firmly hawkish stance. Markets have repriced for a possible back-to-back rate hike to 4.10% on March 17, helping AUD/USD regain pre-Operation Epic Fury levels and offset broader risk-off sentiment.

RBA repricing underpins Australian Dollar

"AUD has emerged as a primary outlier in the G10 space, demonstrating significant resilience against the volatility of the ongoing Iran conflict."

"This outperformance is driven by stark monetary policy divergence, as the Reserve Bank of Australia maintains a distinct hawkish stance relative to its peers."

"Following RBA Deputy Governor Andrew Hauser’s recent affirmation that inflation remains the priority of the dual mandate, noting that price pressures were already exceeding February projections prior to the Iran-related energy shock, markets have aggressively repriced the March 17 policy path."

"With a 66% probability now factored in for a back-to-back 25 bps hike to 4.10%, AUD/USD reclaimed the 0.7118 level held prior to Operation Epic Fury, reaching a Wednesday high of 0.7187."

"This price action suggested that the RBA’s commitment to curbing secondary inflationary effects from elevated energy costs is currently outweighing broader "risk-off" sentiment."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)