Recently, anyone paying attention to the Australian dollar should have noticed that this once high-yield currency is becoming less attractive. I’ve carefully analyzed the trend of the Australian dollar and want to share some observations with everyone.

As the fifth-largest trading currency in the world, the Australian dollar originally had high liquidity and low spreads, making it a good trading instrument. But the problem is that Australia’s economy is too dependent on exports of bulk commodities like iron ore and coal. As long as global commodity prices fluctuate, the AUD tends to change dramatically. Over the years, the US dollar has been in a strong cycle; from early 2013 to 2023, the AUD depreciated by over 35%, while the US dollar index rose by more than 28% during the same period. The euro, yen, and Canadian dollar have also depreciated against the dollar, indicating that this isn’t just an Australian dollar issue but a reflection of the entire strong dollar era.

In 2024, the AUD fell even more sharply, with a full-year decline of about 9.2%. Entering 2025, due to rising trade tensions and recession fears, the AUD once dropped to 0.5933, hitting a five-year low. Analysts generally agree that US tariffs have hurt global trade, and the decline in raw material exports has exposed the weakness of the AUD as a commodity currency. Coupled with the difficulty in reversing the interest rate differential between Australia and the US, and weak domestic economic conditions, capital has naturally flowed out.

However, by mid-2025, the situation showed signs of improvement. Iron ore and gold prices surged, the Fed’s rate cut expectations increased, and risk appetite recovered, leading the AUD to rebound. In September, it once rose to 0.6636, reaching a new high since November 2024. But can this rebound last? I believe the key depends on three factors.

First is the stance of the Reserve Bank of Australia. In Q3 2025, Australia’s CPI rose 1.3% month-over-month, exceeding expectations. The RBA emphasized that inflation still remains under pressure and said they would wait until inflation enters a sustainable downward trajectory before considering easing policies. This means the AUD will have some short-term support, but policy divergence remains.

Second is the US dollar trend. Although the Fed has cut rates, Chairman Powell’s tone remains cautious. The US dollar index rebounded from 96 in summer and has gained about 3%, with a rising likelihood of breaking above 100. A stronger dollar generally weakens the AUD, reflecting an inverse relationship.

Third, and very importantly, is China’s economy. Australia’s iron ore, coal, and natural gas are mainly sold to China. The health of China’s economy directly influences the AUD’s direction. If China’s recovery slows, the AUD will lose a key support.

Regarding AUD/USD forecasts, major institutions have differing views. Morgan Stanley is more optimistic, expecting the AUD to reach 0.72 by the end of 2025. UBS is more conservative, believing global trade uncertainties will limit the AUD’s rise, maintaining around 0.68 by year-end. CBA’s analysis is the most cautious, suggesting the AUD’s recovery may be short-lived, with a peak around March 2026, followed by a decline.

Looking at the AUD/CNY exchange rate, it closely follows the AUD/USD trend, but due to lower volatility in the yuan, the decline might be slightly smaller. In the short term, AUD/CNY may fluctuate between 4.6 and 4.75, with a possible short-term rise to around 4.8 if the yuan weakens.

On the technical side, the AUD/USD currently fluctuates between 0.63 and 0.66. If inflation data remains supportive and the economy stabilizes, it may test above 0.66. Conversely, if global risk appetite deteriorates or the dollar rebounds, the AUD could fall back to 0.63 or lower.

My observation is that the AUD is currently in a phase of technical consolidation and fundamental debate. Short-term trading should focus on range-bound strategies, with follow-through on breakouts. The medium- to long-term direction depends on the Fed’s policy shifts and whether global trade risks ease. If data reinforce rate cut expectations, consider positioning for long positions; if not, be cautious of a dollar rebound.

The volatility of the AUD exchange rate is quite significant, presenting both risks and opportunities for traders. But regardless, all investments carry risks, so caution is essential. I recommend everyone closely monitor economic data releases, stay flexible with strategies, and avoid being misled by short-term fluctuations.