Australian Dollar Slips as Risk Aversion Rises on US-Iran Escalation

Australian Dollar Slips as Risk Aversion Rises on US-Iran Escalation

By tredu.com 6/23/2025

The Australian Dollar (AUD) extends its losses for a third straight session amid rising Middle East tensions. Despite positive PMI data from Australia, risk-off sentiment prevails as traders await the US PMI release and potential Fed rate cuts.

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Australian Dollar Slips as Risk Aversion Rises on US-Iran Escalation

Australian Dollar Falls as Risk-Off Mood Dominates on US-Iran Conflict

The Australian Dollar (AUD) dropped against the US Dollar (USD) on Monday, continuing its three-day losing streak, as rising geopolitical tensions in the Middle East and market-wide risk aversion weighed on the Aussie. The AUD/USD pair fell below key technical levels amid concerns over global stability.

US Airstrikes Spark Safe-Haven Demand

Market sentiment deteriorated sharply after US President Donald Trump confirmed strikes on three Iranian nuclear facilities — Fordow, Natanz, and Isfahan — alongside Israeli operations. In response, Iran’s parliament approved closing the Strait of Hormuz, a vital oil shipping route, escalating fears of broader conflict.

Safe-haven demand for the US Dollar surged, pushing AUD/USD lower as investors fled riskier currencies.

Mixed PMI Data From Australia

Despite the geopolitical pressure, Australia’s PMI data from S&P Global offered modest optimism:

  • Manufacturing PMI (June): 51.0 (unchanged)
  • Services PMI (June): 51.3 (up from 50.6)
  • Composite PMI (June): 51.2 (up from 50.5)

The readings suggest continued economic expansion, but failed to lift the AUD due to overriding global concerns.

Fed Rate Cut Speculation in Focus

On the monetary policy front, Federal Reserve Governor Christopher Waller signaled that rate cuts may begin as early as July, supporting US Dollar strength further. A dovish Fed usually weakens the Dollar, but in the current context, the safe-haven role of the USD is dominating.

Internal Linking Suggestions (for Tredu.com):

  • Live AUD/USD Chart
  • Understanding PMI and Forex Impact
  • Middle East Geopolitics and Forex
  • US Dollar Forecast This Week
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