Recently, there is a phenomenon worth paying attention to. The performance of the Australian dollar over the past two years has indeed been somewhat perplexing. As the fifth most traded currency globally, the AUD should be very popular, with high liquidity and low spreads, and many traders prefer to use it for short-term or medium- to long-term positioning. But the problem is, the AUD has basically been weakening over the past decade.

I looked at historical data, starting from the 1.05 level in early 2013, and over the ten years until 2023, the AUD/USD has depreciated by more than 35%, while the US dollar index has risen by 28.35% during the same period. What does this indicate? It’s not just an AUD issue; the euro, yen, and Canadian dollar have also depreciated against the dollar. This is a comprehensive strong dollar cycle. Both technical and fundamental factors are unfavorable for the AUD, which explains why even rebounds have difficulty stabilizing.

Why is the AUD so weak? The key reason is that Australia’s economy is highly dependent on exports of bulk commodities like iron ore, coal, and copper, making it a typical commodity currency. Fluctuations in global raw material prices cause the AUD exchange rate to fluctuate sharply. Plus, as a high-yield currency, the AUD has traditionally been a target for hot money and carry trades, but these interest rate advantages have diminished over the years. In Q4 2024, the AUD/USD plunged sharply, with an annual decline of about 9.2%. Entering 2025, amid rising global trade tensions and recession fears, the AUD once fell to 0.5933, hitting a five-year low.

However, from the second half of 2025, the situation started to change. Iron ore and gold prices surged, the Federal Reserve began cutting interest rates, and capital flowed into risk assets, pushing the AUD higher. By September, the AUD/USD rose to 0.6636, reaching a new high since November 2024. The question is, will the AUD continue to rise?

I believe this depends on several key factors. First is Australia’s own economic condition. In Q3 2025, Australia’s Consumer Price Index rose 1.3% quarter-over-quarter, exceeding market expectations. The Reserve Bank of Australia has repeatedly emphasized that core inflation pressures are more stubborn to cool than expected, and it won’t ease policy easily until inflation enters a sustainable downward trajectory. This suggests that the AUD may find short-term support, as it becomes more attractive compared to currencies that are about to start cutting rates.

Second is the trend of the US dollar. Although markets have been discussing dollar depreciation and de-dollarization, the dollar index has shown unexpected resilience since bottoming near 96 this summer, rebounding about 3%, with a growing likelihood of breaking the 100 psychological threshold. Generally, when the dollar strengthens, the AUD tends to weaken, as they are inversely correlated.

The third important factor is China’s economy. Australia’s economic structure is heavily resource-export dependent, with China being its largest buyer. The health of China’s economy directly influences demand for key raw materials like iron ore, coal, and natural gas, which is central to the AUD’s movement. When China’s economy recovers strongly, it significantly boosts Australia’s resource exports and market confidence in the AUD. Conversely, if China’s economy slows, especially with a persistent downturn in the property market, concerns about long-term raw material demand will rise.

Regarding AUD/RMB forecasts, major institutions’ views are actually diverging. Morgan Stanley expects the AUD/USD to rise to 0.72 by the end of 2025, mainly based on the possibility of the RBA maintaining a hawkish stance and rising commodity prices. UBS is more conservative, believing that global trade uncertainties and Fed policy shifts could limit AUD gains, projecting the end-of-year rate around 0.68. CBA economists are more cautious, suggesting the AUD’s recovery might be short-lived, forecasting a peak around March 2026, with a possible decline again by year-end.

From a technical perspective, in the short term, the AUD/USD is expected to fluctuate between 0.63 and 0.66. If inflation data continues to be supportive and the economy remains stable, it may test resistance above 0.66. If global risk appetite deteriorates or the dollar rebounds, the AUD could fall back toward 0.63 or lower. Medium-term, trend-following strategies might be more appropriate, with key attention on the RBA’s policy shifts and dollar movements.

For AUD/RMB, considering the overall stability of the RMB, the next 1-3 months could see it oscillate between 4.6 and 4.75. If the RMB weakens due to domestic economic pressures or external factors, the AUD/RMB might temporarily rise toward 4.8. But all of this depends on the stability of Sino-Australian trade relations, the RMB exchange rate influenced by Chinese central bank policies, and Australia’s economic data performance.

In terms of trading strategies, short-term recommendations focus on range trading between 0.6370 and 0.6450, with breakout follow-up. If this week’s data reinforce rate cut expectations, consider long positions; otherwise, watch for dollar rebound risks. The medium- to long-term direction depends on signals from Fed policy shifts and whether global trade risks ease. Any investment involves risks; forex trading is high-risk, so proceed with caution.