Do you really understand why the Australian Dollar is weakening?

The Australian Dollar (AUD) is among the top 5 currencies in the world by trading volume, yet it has fallen 35% against the US Dollar over the past 10 years. During the same period, the US Dollar Index has risen by 28%. In other words, it's not just that the Australian Dollar is weak, but that the US Dollar is too strong.

Why is the Australian Dollar a "Commodity Coin"? Australia's economy relies on resource exports such as iron ore, coal, and copper. Even a slight fluctuation in global commodity prices can cause the Australian Dollar exchange rate to become unstable. Because it is a high-yield currency, it used to be popular for carry trades, but now that it has weakened this much, the situation is different.

Recent Movement: After the Trump "equivalent tariff" shock in April 2025, it rebounded to 0.6636 in September. However, compared to 1.05 in 2013, it is still far off. Moreover, it had dropped to 0.5933 at one point this year (the lowest in 5 years).

What is supporting the purchase of Australian Dollars?

• Iron ore and gold prices are soaring.
• Since the Federal Reserve Board (FRB) has started to lower interest rates, the Dollar may weaken.
• Australia's unemployment rate is historically low, and the economy is not as bad as expected.

But be careful: Wall Street's views are divided. Morgan Stanley expects it to rise to 0.72 by the end of the year, but UBS predicts it will be capped at 0.68. CBA says the peak will be in March 2026, after which it will drop again.

Whether the Australian Dollar will truly "come back" depends on these three factors: The Australian central bank's commitment to continue raising rates, the presence or absence of a rebound in the Dollar, and the degree of recovery in the Chinese economy. Since China is the largest buyer of Australian resources, a slowdown in the Chinese economy would mean the end for the Australian Dollar.

Bottom line: The Australian Dollar is highly liquid and easy to trade, making technical analysis more effective. However, in the medium to long term, uncertainty in the global economy and the pressure of the Dollar's rebound will weigh heavily. A short-term rebound can be expected, but it is highly likely that the strength seen in the past will not return.