The Australian Dollar (AUD) ends its three-day decline on Wednesday, bouncing back from levels not seen since mid-November. Nevertheless, hawkish remarks from Federal Reserve (Fed) officials and the influx of safe-haven flows could bolster the US Dollar (USD) and potentially limit the upside of AUD/USD in the short term.
The Australian Dollar gains upward momentum as the ASX 200 Index rebounds after three consecutive days of losses. However, AUD encountered obstacles, possibly due to risk aversion as investors awaited Israel's response to Iran's air strike on Saturday with caution. A Reuters report indicated that a third meeting of Israel's war cabinet, scheduled for Tuesday to determine a reaction to Iran's unprecedented direct attack, was postponed until Wednesday. Meanwhile, Western allies are considering swift imposition of new sanctions against Tehran to dissuade Israel from escalating the situation further.
The US Dollar Index (DXY) remains close to a five-month high of 106.51, despite slight declines in US Treasury yields. Fed Chairman Jerome Powell's remarks on Tuesday, stating that recent data suggests little progress on inflation this year and that it will take longer than anticipated to reach the 2% target, may have contributed to a hawkish stance and provided some backing to the US Dollar.
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