Recently, I’ve been watching the Australian dollar’s price action and noticed an interesting phenomenon. As the world’s sixth-largest trading currency, the performance of the Australian dollar over the past decade is actually quite thought-provoking. Many people feel the same way— it’s as if the Australian dollar has “higher highs that keep getting lower,” and the overall trend is clearly on the weak side. I spent time sorting out the core logic behind the Australian dollar exchange rate movements over the past ten years, and found that there’s a very clear story behind it.

Starting from the beginning of 2013, when the AUD/USD was close to a high of 1.05, it has now depreciated by more than 35%. Over the same period, the US Dollar Index rose by more than 28%, and the euro, the Japanese yen, and the Canadian dollar also all weakened against the US dollar. What does this indicate? In reality, the Australian dollar’s weakness is largely caused by “the US dollar being too strong,” rather than the Australian dollar itself having particularly poor fundamentals. For more than ten years, it has essentially been a sustained strong-US-dollar cycle.

If you look more closely at the different phases of the Australian dollar exchange rate over the past ten years, the logic becomes even clearer. From 2009 to 2011, with China’s strong recovery and a surge in commodities, the Australian dollar rose at one point to nearly 1.05. Then from 2020 to 2022, during the global commodities bull market, iron ore hit fresh highs and interest rates rose rapidly, and the Australian dollar once again broke above 0.80. But in recent years (2023 to 2024), China’s recovery has been weak; the Australian dollar has been consolidating in a high range, and the interest-rate differential advantage has also been narrowing.

Now, here’s the interesting part. The reason the Australian dollar is treated as a “high-yield currency” is that its core appeal lies in carry trading driven by interest rate differentials. In the past, Australian interest rates were clearly much higher than those in the US, so capital flowed in continuously. But now the Reserve Bank of Australia (RBA) cash rate is also only around 4%, so the appeal is more moderate. On top of that, Australia’s export structure is highly dependent on iron ore, coal, and energy, and China is its largest buyer. In the past few years, China’s data has not met expectations, so the Australian dollar’s position as a commodity currency has naturally been hit.

What I’ve observed is that whenever the Australian dollar approaches its previous high range, sell pressure in the market increases noticeably, which shows that the market’s confidence in the Australian dollar is still limited. To push the Australian dollar into a truly medium- to long-term uptrend, I believe three conditions need to be met at the same time: the RBA maintains a relatively hawkish stance, China’s demand improves materially, and the US dollar enters a phase of structural weakness. If only one of these conditions is met, the Australian dollar is more likely to just trade sideways within a range rather than rise in a one-way direction.

Let’s see what institutions are predicting. Morgan Stanley is bullish on the Australian dollar’s fundamentals, expecting a target price as high as 0.725. Goldman Sachs has adjusted its forecast range for the next 3 to 12 months to 0.72 to 0.74. Even Deutsche Bank predicts it could reach 0.76 by the end of 2026. Their logic is that the global economy has resilience, commodity demand remains strong, and interest-rate spreads widen. But there are also more cautious voices—for example, Commonwealth Bank of Australia believes that interest-rate differentials pose a significant downside risk, and that a high level for the Australian dollar may be difficult to sustain.

My personal view is that the Australian dollar exchange rate over the past decade tells us this is a commodity currency that tends to swing back and forth within a range. Instead of trying to predict precisely how high the Australian dollar will go, it’s better to focus on entry and exit points at the boundaries of the range and on risk management. Short-term pressure mainly comes from policy changes by the RBA and the Fed, with changes in the interest-rate differential becoming the key driver. The long-term bullish case lies in Australia’s resource export business and the commodity cycle.

To be honest, for the Australian dollar to truly strengthen, three conditions must be met simultaneously: the US dollar entering structural weakness, a real rebound in China’s economy, and the RBA maintaining relatively high interest rates. From what it looks like now, that still seems to be a ways off. However, since 2024, as commodity prices such as iron ore and gold have rebounded, and market expectations for Fed rate cuts have heated up, the Australian dollar has indeed shown a clear rebound from the lows. In most of 2025, it stayed within a relatively high range compared with the past few years. In 2026, although it will still be far below the historical highs above 1.0, compared with the lows in 2022 to 2023, it has already seen a substantial recovery. This recovery process itself is well worth paying attention to.