The Australian dollar continues to weaken? The outlook for the exchange rate of the Australian dollar against the Chinese yuan in 2025 is concerning.

The Australian dollar used to be a hot commodity, but now it has become a useless thing. As the world's fifth largest volume currency, the Australian dollar has been in a downturn in recent years, and I feel pain for it when I look at those data. From being a high-interest currency in the past to becoming a weak currency today, it has truly been a tough journey.

Based on the data at hand, the exchange rate of the Australian dollar against the Chinese yuan is expected to fluctuate between 4.611 and 4.735 in 2025, overall trending weak. At the beginning of September, it may be around 4.664, and by the end of October, it is expected to drop to 4.581, a decline of nearly 1%. There will not be a significant rebound in the short term, which is not good news for those holding Australian dollars.

Why is the Australian Dollar becoming less attractive?

It's quite heartbreaking to say that the Australian dollar has depreciated by more than 35% against the US dollar over the past ten years since its glorious moment in 2013! In contrast, the US dollar index has risen by 28.35% during the same period. Isn't this a blatant slap in the face?

In the fourth quarter of 2024, the Australian dollar faced even worse circumstances, plummeting sharply, with an annual decline of 9.2%. As we entered 2025, the situation did not improve, and it once dropped to 0.5933, hitting a five-year low. In simple terms, the Australian dollar is currently in an awkward position:

1. The U.S. tariff policy directly impacts global trade, with poor exports of raw materials.
2. The domestic economy in Australia is in a mess, asset attractiveness has greatly decreased, and funds are flowing out frantically.
3. The interest rate differential between the US and Australia is hard to reverse, and the Australian dollar has lost its allure as a high-yield currency.

Although there was a slight rebound in April, it was merely a result of the weakening US dollar index, rather than the Australian dollar being particularly strong. At this stage, lacking interest rate advantages and export support, it is as difficult as climbing to get the Australian dollar back to 0.70.

Australian Dollar to Chinese Yuan: 2025 Outlook Analysis

The AUD against the RMB is expected to fluctuate within a relatively narrow range in 2025. Specifically:

• Early September: The exchange rate is expected to be 4.664, with a possible peak of 4.766 during the month.
• End of September: Expected to drop to 4.617, a decline of about 1.0%
• October: Initial exchange rate 4.617, highest during the month can reach 4.735, expected to drop to 4.581 by the end of the month.
• November: A slight rebound may occur, rising from 4.581 to 4.620

Trump's policies are a heavy stone pressing down on the Australian dollar. What will his tariff policies towards China be after he takes office? The market generally believes that tariffs may rise to around 40%. If the actual tariffs are lower than this level, the pressure on the Australian dollar will ease slightly; but if they exceed expectations, the Australian dollar will have to brace for a new round of hits.

Worse still, some countries have already allowed their currencies to depreciate in response to the U.S. tariffs, which will further depress the Australian dollar. The Australian dollar is seen as a “substitute” for the Chinese yuan, and typically when the yuan depreciates by 2-3%, the Australian dollar tends to drop by 3-5%. Trump may also implement expansionary fiscal policies, leading to a stronger U.S. economy, rising inflation, and a stronger dollar, which would be an additional blow to the Australian dollar.

Uncertain Outlook for RBA Rate Cuts

The Reserve Bank of Australia cut interest rates for the first time this year by 25 basis points to 4.1% in February, but their desire to control inflation remains strong. The overall Australian economy is weak, with sluggish growth in the private sector, while the public sector is holding up. If the stimulating effect of the public sector on the economy is exhausted, the Australian economy is likely to fall into a “slow lane.”

I believe that the AUD to RMB exchange rate will remain weak in 2025 because:

1. Australia's export performance is poor, and net trade contributes little to GDP growth.
2. Uncertainties such as fluctuations in commodity prices, changes in global demand, and trade frictions continue to exist.
3. The economic outlook for Australia is “rarely bleak”, while the U.S. economy is “very healthy”.

If the United States' tariff policy is indeed intensified, the Australian dollar may continue to weaken, and the Reserve Bank of Australia may even be forced to delay interest rate cuts. This is because a significant drop in the Australian dollar would bring import inflation risks, which would instead cause the Reserve Bank of Australia to delay the interest rate cut cycle.

Is there hope?

There is still some hope. China is a major export market for Australian commodities, and the economic and trade relationship between the two countries is close, with a certain degree of connection between the Renminbi and the Australian dollar. The World Bank has raised its forecast for China's economic growth in 2025, believing that the Chinese economy will maintain strong momentum. If the Chinese economy performs well, it could provide some support for the Australian dollar.

However, overall, the outlook for the Australian dollar against the Chinese yuan in 2025 is not optimistic. Investors should remain cautious and pay attention to changes in global trade policies and trends in commodity prices. For those holding Australian dollars, it may be necessary to prepare mentally for continuing to endure a period of sluggish market conditions.

At present, it seems that the Australian dollar will take a long time to regain its former glory. Before that, it may continue to hover in the range of 4.5-4.7, looking for a breakthrough.