Recently, I’ve been looking at the trend of the Australian dollar and found a very interesting phenomenon. As the sixth most traded currency in the world, the Australian dollar has been weakening over the past decade, especially from nearly 1.05 in 2013 down to around 2023, with a decline of over 35%. But the story behind this isn’t as simple as it seems.

Many people would instinctively think that there’s a problem with the Australian dollar itself, but that’s not the case. During the same period, the US dollar index rose by 28%, and the euro and yen also depreciated against the dollar. So, the weakness of the Australian dollar is essentially due to a strong US dollar — a comprehensive strong dollar cycle. The Australian dollar hitting historic lows is less about Australia’s issues and more a reflection of US dollar dominance.

So why is the Australian dollar so weak? I think there are a few main reasons. First, the AUD was once considered a high-yield currency, and carry trades were very popular, but now, although the RBA’s interest rate is around 4%, it no longer has the obvious interest rate advantage it once did. Second, Australia’s export structure is highly dependent on China, with iron ore, coal, and energy making up the bulk. In recent years, China’s economic weakness has directly hit the AUD’s commodity currency characteristics. Third, the drag from a strong US dollar is still ongoing.

After 2024, the situation has started to change. As the Fed’s rate cut expectations heat up, the US dollar index has retreated from its highs, coupled with rising commodity prices, the AUD has begun to rebound. By 2025, it has mostly maintained a relatively high level. Although in 2026 it’s still far below the past high above 1.0, it has already seen a significant recovery from its historic lows. However, every time the AUD approaches previous high zones, selling pressure clearly increases, indicating that market confidence in the AUD remains limited.

To judge the future trend of the AUD, I think three key factors need to be watched. First is the RBA’s interest rate policy — as long as the Reserve Bank of Australia maintains a relatively hawkish stance and the interest rate differential can become a highlight again, the AUD will have a chance. Second is China’s economy and commodity prices, which directly impact Australia’s exports and currency demand. Third is the US dollar trend and global risk sentiment — the Fed’s policy cycle remains a leading indicator of global capital flows.

Looking at forecasts from major investment banks reveals the market’s divergence. Morgan Stanley is optimistic about Australia’s fundamentals, with a target price of 0.725; Goldman Sachs has raised its forecast range to 0.72–0.74. Deutsche Bank even predicts it could reach 0.76 by the end of 2026. But some institutions are more cautious, believing that interest rate differentials pose downside risks, and the AUD’s high levels may not last.

Honestly, rather than trying to precisely predict the AUD’s movement, it’s better to treat it as a range-bound commodity currency. In the short term, the RBA’s hawkish stance and strong raw material prices provide support, but in the medium to long term, global economic uncertainties and a possible rebound in the US dollar should be watched. Because of its high liquidity and strong volatility patterns, the medium- and long-term trend of the AUD is actually relatively easier to judge.

If you want to participate in AUD trading, you might consider forex margin trading, using technical indicators like the 200-day moving average, RSI, and MACD to do range trading. However, I must remind you that forex trading is high-risk investment — investors could lose all their capital, so proper risk management is essential.