The Australian dollar slipped to around $0.70 on Monday, erasing the previous week’s gains as investors moved into safe-haven assets such as the US dollar amid escalating conflict in the Middle East. Over the weekend, the US and Israel launched coordinated strikes on Iran that resulted in the death of Iran’s Supreme Leader, Ayatollah Ali Khamenei. Tehran responded with retaliatory attacks on US assets in neighboring countries, unsettling global financial markets.
The surge in geopolitical risk pressured risk-sensitive currencies, including the Australian dollar, which is often viewed as a proxy for global growth and commodity demand. On the domestic front, the manufacturing PMI was revised down to 51 in February 2026 from a preliminary estimate of 51.5, its lowest level in four months and easing from 52.3 in January. At the same time, the Melbourne Institute’s Monthly Inflation Gauge fell 0.2% month-on-month in February, reversing a 0.2% increase in January and marking its first decline since last August.