A series of developments in the Middle East and central bank policy decisions have driven significant moves in major currency pairs. The Reserve Bank of New Zealand (RBNZ) held its Official Cash Rate steady at 2.25% during its April policy meeting, a move widely anticipated by markets. RBNZ Governor Anna Breman emphasized that higher oil prices are reducing household purchasing power and business profit margins, prompting a cautious 'wait and see' stance. She also noted that New Zealand could see stronger economic growth this year if the Middle East conflict is resolved swiftly, but warned of ongoing supply disruptions and uncertainty regarding the conflict's duration and consequences [1][3].
The New Zealand Dollar (NZD) strengthened against the US Dollar (USD), with NZD/USD rising to near 0.5830 during Asian trading hours on Thursday, up 0.13% on the day. This move was attributed to the RBNZ's hawkish hold and the prospect of ongoing stimulus from previous rate cuts [1][3].
Meanwhile, the US Dollar received safe-haven support amid renewed uncertainty over the ceasefire agreement between the US and Iran. Iranian officials, including Parliament Speaker Mohammad Bagher Ghalibaf, accused the US of breaching key clauses of Iran's 10-point proposal, calling further talks 'unreasonable.' Reports indicated that Israel launched a large-scale campaign across Lebanon, resulting in over 250 deaths, and that shipping through the Strait of Hormuz had halted following fresh Israeli strikes. US Vice President JD Vance signaled that the strait could begin reopening as he leads a US delegation to Islamabad for direct talks with Iran this weekend [1][2][4].
The Canadian Dollar (CAD) slipped against the USD, with USD/CAD trading around 1.3860, as safe-haven flows into the USD offset a rebound in oil prices. West Texas Intermediate (WTI) crude traded near $91.50, supported by supply concerns after Iranian media reported a halt in tanker traffic through the Strait of Hormuz [2].
The Australian Dollar (AUD) also weakened, snapping a three-day winning streak and trading near 0.7030. The decline was attributed to fading optimism over the US-Iran ceasefire, with markets perceiving the 10-point framework as fragile and incomplete. The ongoing Middle East conflict has lifted energy prices and heightened inflation risks, reinforcing expectations that global central banks may keep policy tighter for longer. The Reserve Bank of Australia (RBA) has already raised rates by 50 basis points to 4.10%, with markets anticipating another hike in May and rates potentially reaching 4.61% by year-end. Traders are also awaiting the US Consumer Price Index (CPI) report for March, with headline inflation expected to rise to 3.3% year-over-year, up from 2.4%, driven by higher oil prices [4].
CONCLUSION
Currency markets are experiencing heightened volatility as geopolitical tensions in the Middle East undermine ceasefire efforts and drive safe-haven demand for the US Dollar. Central banks in New Zealand and Australia are maintaining or tightening policy in response to inflation risks, while commodity-linked currencies like the CAD and AUD face pressure from both risk sentiment and energy price swings. The market remains focused on further developments in the region and upcoming inflation data for direction.