The Australian and New Zealand dollars experienced volatility early March 2, initially plunging against the greenback before recovering most losses as markets began to digest the impact of escalating military conflict in the Middle East.
Following joint strikes by the United States and Israel on Iran over the weekend, investors rushed toward safe-haven assets, causing the "risk-sensitive" Antipodean currencies to drop sharply.
The Australian dollar dived by as much as 1.2% in early Asian trade to hit $0.7033, while the New Zealand dollar fell to $0.5948.
However, both currencies retraced those losses as oil prices eased from their initial surges, with the AUD last down just 0.1% at $0.7107 and the NZD also down 0.1% at $0.5986.
Despite the temporary calm, analysts remain cautious about a protracted conflict.
Commonwealth Bank of Australia economists warn that a worst-case scenario involving severe energy supply disruptions could push the Australian dollar below $0.7000 quickly this week.
Domestically, market focus now shifts to local economic indicators and central bank commentary.
Data released showed a marginal 0.1% slip in business inventories for the fourth quarter, ahead of March 4’s crucial GDP report.
Furthermore, Reserve Bank of Australia Governor Michele Bullock is scheduled to speak on March 3, where she is expected to address how the heightened geopolitical tensions might influence the future path of monetary policy, following the RBA's interest rate hike last month.