The recent performance of the Australian dollar against the US dollar is indeed quite interesting. On May 6, it jumped directly to 0.7277, the highest level that hasn’t been seen since June 2022. From the beginning of 2026 to now, the Australian dollar has risen cumulatively against the US dollar by more than 8%, and that gain is quite eye-catching among G10 currencies.

I looked into the logic behind it, and there are mainly two driving forces. One is that tensions between the US and Iran have recently eased, boosting risk appetite, which has increased demand for risk assets like the Australian dollar. The other—and more important—is the market’s expectations for rate hikes by the Reserve Bank of Australia. On May 5, it was just announced that there would be another 25 basis point hike to 4.35%, which is the third consecutive rate hike. Since inflation remains relatively stubborn, the market now widely expects the RBA to continue taking action in the third quarter of this year.

What’s interesting is that the divergence in global central bank policies has now become an important force in the market. Analysts at ABN AMRO pointed out that since the start of the Middle East war, the best-performing G10 currencies have been the Norwegian krone and the Australian dollar, because both countries’ central banks have been raising rates due to concerns about inflation. By contrast, investors now generally believe that the likelihood of the US Federal Reserve continuing to raise rates is low; compared side by side, the Australian dollar’s appeal looks even more prominent.

Looking ahead, is there still room for the Australian dollar to rise? I think there is. The Australian dollar is already the highest-yielding currency among G10 currencies, and Australia’s energy advantage is also attractive for capital inflows. More importantly, Australia is benefiting from the rapid development of AI infrastructure, industrial metals demand is heating up, and the economic outlook appears to offer quite a number of opportunities. The view from Hang Seng Bank is also along the same lines, believing that the AUD exchange rate has the potential to keep rising in the future.

ING Group is also relatively bullish on the opposite logic for USD/AUD. They believe that given the RBA’s more hawkish monetary policy path, the Australian dollar still has room to move higher. Their forecast is that AUD/USD could reach 0.73 in Q2 2026, 0.74 in Q3, and 0.75 in Q4. If this forecast is realized, the Australian dollar would have further upside potential from its current level.