The Australian Dollar extended its advance for a third straight session on Wednesday, with AUD/USD trading near 0.7120 in Asian hours. The pair was supported by improved risk sentiment, as investors responded to signs that renewed US-Iran discussions could emerge before a two-week ceasefire period expires.
Reports indicated that US officials are assessing the possibility of restarting negotiations as soon as this week. Vice President JD Vance said early talks had made significant progress and suggested that follow-up discussions could take place within days. The prospect of a diplomatic path helped ease some immediate geopolitical concerns and lent support to the Australian currency, which tends to benefit when market sentiment improves.
At the same time, comments from Reserve Bank of Australia Deputy Governor Andrew Hauser added a note of caution. He warned that the months ahead may be difficult for Australia as the economy faces the combined pressure of an energy crisis linked to Middle East tensions and still-elevated inflation. Hauser said persistent price pressures and supply constraints are making it harder for the economy to absorb new shocks, increasing the risk of a stagflation-like environment.
The US dollar also came under pressure after softer-than-expected Producer Price Index figures suggested that inflation at the wholesale level is moderating. That outcome reduced expectations for further aggressive tightening by the Federal Reserve and weighed on Treasury yields, which in turn supported the Australian Dollar.
US PPI rose 0.5% month-on-month, well below forecasts for a 1.2% increase. Core PPI rose just 0.1% compared with expectations of 0.6%. On an annual basis, headline PPI increased 4% in March, below the 4.6% estimate, while core PPI held steady at 3.8%.
The data reinforced the view that inflationary pressures in the US are gradually easing, even as policymakers remain attentive to the resilience of the services sector and the broader impact of energy-related costs.
