Recently, I looked at some data on the Australian dollar's trend and found an interesting phenomenon. What has happened to the Australian dollar over the past ten years? Many people share the same feeling — the Australian dollar seems to be getting weaker and weaker, with each high point lower than the last.

Speaking of the Australian dollar, it used to be the sixth-largest currency by trading volume globally, holding a significant position. But if you look at the full picture of its trend over ten years, from a high near 1.05 in early 2013 to around 2023, the AUD has depreciated by over 35%. During the same period, the US dollar index rose by 28.35%, and other major currencies like the euro, yen, and Canadian dollar also depreciated against the dollar. This indicates a key issue: the weakness of the AUD is largely not due to problems with the currency itself, but because the US dollar is too strong.

The AUD has always been viewed as a high-yield currency, and carry trades used to attract significant capital. But now, the situation has changed. Although the Reserve Bank of Australia (RBA) maintains a cash rate around 4%, compared to the period of 2009-2011 when rates were noticeably higher than the US dollar, its attractiveness has softened considerably. Additionally, Australia’s export structure is highly dependent on iron ore, coal, and energy, and with China’s demand not meeting expectations in recent years, raw material exports have declined, weakening the commodity currency characteristics of the AUD.

Starting after 2024, the situation began to shift. As commodity prices rebounded, market expectations for the Federal Reserve to cut interest rates increased, and the US dollar index retreated from high levels, the AUD experienced a noticeable rebound from lows. By 2025, the AUD mostly maintained a relatively high range seen in recent years. However, whenever the AUD approaches previous high zones, selling pressure increases significantly, reflecting that market confidence in the AUD remains limited.

The key turning points in the ten-year trend of the AUD mainly depend on three factors. First is the RBA’s interest rate policy — as long as the Australian central bank remains more hawkish than expected and maintains relatively high rates, the AUD could rebuild its interest rate advantage. Second is China’s economy and commodity prices — these are external drivers for the AUD. If China’s stimulus policies are effective and domestic demand and infrastructure recover, leading to rising iron ore and other commodity prices, this usually provides tangible support for the AUD. Third is the US dollar trend and global risk sentiment — when the dollar enters a structural weakening phase and risk appetite increases, capital tends to flow more into commodity currencies.

For the AUD to break out into a genuine medium- to long-term bull market, these three conditions need to be met simultaneously. If only one is present, the AUD is more likely to stay in a range rather than trend upward unilaterally. Most market analysts agree that the AUD has short-term recovery potential, but returning to a strong bull phase requires clearer macroeconomic conditions. Deutsche Bank is bullish on the AUD, with a target of 0.76 by the end of 2026, believing that resilient global economic growth and strong commodity demand will support it. Morgan Stanley forecasts a range of 0.72-0.74, based on the premise that if the US economy soft-lands and the dollar index declines, it will favor commodity currencies.

From my personal observation, rather than trying to precisely predict the AUD’s movements, a more practical approach is to treat the AUD/USD as a commodity currency oscillating within a range, focusing on entry and exit points at the boundaries and risk management. Due to its high liquidity, strong volatility patterns, and its economic structure, medium- to long-term trend judgments are relatively straightforward. In the short term, the hawkish stance of the RBA and strong raw material prices will provide support, but in the medium to long term, global economic uncertainties and potential rebounds in the dollar could limit the upside for the AUD.