AUD Slumps as US Dollar Rebounds Amid US-Iran Tensions

The Australian Dollar (AUD) weakened against major currencies on Monday, losing ground to the strengthening US Dollar. The AUD/USD exchange rate dropped by 0.30% to around 0.7000.

This decline was partly due to China's Manufacturing Purchasing Managers Index (PMI), which slowed down in July, missing market expectations of 51.5. Despite this, the PMI remained above 50, indicating continued expansion in manufacturing activity in Australia's largest trading partner.

The Reserve Bank of Australia (RBA) continues to support a restrictive monetary policy stance, with RBA Assistant Governor Sarah Hunter attributing recent moderation in inflation to lower fuel prices and underlying inflationary pressures remaining above the central bank's 2%-3% target range. This has led markets to price in another rate hike this year.

The US Dollar, on the other hand, regained ground after its recent decline, as investors remained cautious due to conflicting statements from US President Donald Trump and Iranian officials regarding planned military strikes against Iran. The uncertainty surrounding these developments limited investors' appetite for risk, contributing to the strengthening of the USD.