The truth behind the 10-year AUD exchange rate trend chart: Why does the Australian dollar always struggle to rise?

The story of the Australian dollar is actually a tragedy of being “crushed by the US dollar.”

The awkward current situation of the AUD: easy to rebound, hard to stabilize

The Reserve Bank of Australia (RBA) cash rate is about 3.60%. Theoretically, this should attract a lot of hot money. But looking at the 10-year trend chart of AUD/USD makes it clear—this currency has basically been following a “mountain and even lower mountain” pattern.

From the early 2013 level of 1.05 to now falling below 0.70, the AUD has depreciated over 35% in ten years. During the same period, the US dollar index rose by 28.35%, and the euro, yen, and Canadian dollar against the dollar all depreciated. This is not an isolated problem for the AUD but part of a comprehensive “strong dollar cycle.”

There was indeed a rebound in 2025. Commodity prices surged, the Fed cut interest rates, and the AUD once rose to 0.6636, appreciating 5-7% for the year. But the key is—whenever the AUD approaches previous highs, selling pressure appears. The market lacks confidence in the AUD.

Why does the AUD always “spike and then fall back”?

Looking at a longer timeframe, the AUD’s problems are caused by more than one or two factors.

First, the inherent fate of commodity currencies. Australia’s export structure is highly dependent on iron ore, coal, and energy. China used to be the demand engine, but now its recovery momentum is clearly insufficient. Even if international commodity prices rebound in the short term, if Chinese demand doesn’t keep up, the AUD’s gains are just “noise-level” increases.

Second, the erosion of interest rate advantage. Historically, the AUD was a high-yield currency, and interest rate arbitrage was a favorite for hot money. But when the Federal Reserve maintains high rates while the Australian central bank faces inflation pressures, the interest rate spread shrinks significantly. The attractiveness of the interest differential between Australia and the US diminishes, and hot money becomes less enthusiastic.

Third, the impact of US tariff policies. Reduced imports and exports, declining raw material exports, further weaken the AUD’s status as a “commodity currency.” The interest rate differential between the US and Australia is hard to reverse, and Australia’s domestic economy is not strong enough, making its asset attractiveness relatively limited.

The result is: the AUD has become a “rebound but lacking trend” currency. As long as external factors fluctuate slightly, it’s easily influenced, rather than driven by its own fundamentals.

Three key factors that will determine the future of the AUD

To judge when the AUD will truly enter a bullish phase, focus on these three factors:

1. RBA’s interest rate policy — Can the interest rate advantage be restored?

The RBA is still considering whether to raise rates again in 2026. The Reserve Bank of Australia (RBA) forecasts a peak rate possibly reaching 3.85%. If inflation remains sticky and the employment market stays resilient, the RBA may stay hawkish, giving the AUD’s interest rate advantage a chance to rebuild. Conversely, if rate hike expectations fall short, the AUD’s support will weaken significantly.

2. China’s economy and commodity prices — The most important external variables for the AUD

As a commodity currency, Australia’s core dependency is on Chinese demand. If infrastructure and manufacturing activity in China pick up, iron ore prices usually strengthen, and the AUD will respond quickly. But if China’s recovery lacks momentum, even short-term commodity rebounds will cause the AUD to fluctuate up and down.

3. US dollar trend and global risk sentiment — Determines capital flows

The Federal Reserve’s policy cycle remains central to the global forex market. In a rate-cut environment, a weakening dollar usually benefits risk currencies like the AUD. But if risk aversion rises and capital flows back into the dollar, the AUD can be suppressed even if its fundamentals are stable. Current energy prices and global demand remain pessimistic, and investors tend to favor safe-haven assets, which is not positive for the AUD.

For the AUD to truly enter a bull market, three conditions must occur simultaneously: RBA returning to a hawkish stance, a substantial improvement in Chinese demand, and a structural weakening of the dollar. If only one of these is present, the AUD is more likely to fluctuate within a range, with limited chances of a sustained upward trend.

How do major institutions view the AUD in 2026?

Predictions from major investment banks vary widely, reflecting differing market outlooks:

Optimists—Morgan Stanley expects the AUD could rise to 0.72 by the end of 2025. Based on the RBA maintaining a hawkish stance and strong commodity prices. The Traders Union model projects an average of about 0.6875 by the end of 2026, rising further to 0.725 in 2027, emphasizing Australia’s strong labor market and commodity demand recovery.

Conservatives—UBS believes that despite Australia’s resilient economy, global trade uncertainties and potential changes in Fed policy could limit the AUD’s gains, with forecasts around 0.68 by year-end. CBA economists are more cautious, suggesting the AUD’s recovery might be short-lived, predicting the AUD/USD exchange rate will peak around March 2026 but may fall again by year-end.

Neutral observers—Some Wall Street analysts warn that if the US avoids recession but the dollar remains super-strong (due to interest rate differentials), the AUD will struggle to break through resistance at 0.67.

Looking at the 10-year historical pattern of the AUD/USD chart, in the first half of 2026, the AUD is likely to oscillate within the 0.68-0.70 range, influenced by Chinese data and US non-farm payrolls. The AUD won’t crash—Australia’s fundamentals are solid, and the relatively hawkish RBA provides support. But it also won’t surge to 1.0—structural US dollar advantages still exist. Short-term pressures mainly come from fluctuations in Chinese data, while long-term positives include a recovery in Australia’s resource exports and commodity cycles.

Practical investment suggestions for the AUD

AUD/USD is one of the top five most actively traded currency pairs globally, with high liquidity and low spreads, suitable for short-term trading and medium-to-long-term positioning. Due to Australia’s distinctive economic structure and strong volatility patterns, it’s actually easier to judge medium- and long-term trends compared to other currency pairs.

Investors can participate in AUD fluctuations through forex margin trading. With two-way trading, flexible leverage, and low trading thresholds, it’s suitable for small and medium investors. But all investments carry risks; forex trading is high-risk, so investors must implement proper risk management and stop-loss plans.

Final thoughts

The essence of the AUD is that it is a “commodity currency,” closely linked to raw material prices like copper, iron ore, and coal. In the short term, hawkish RBA stance and strong raw material prices provide support; but in the medium to long term, global economic uncertainties and potential US dollar rebounds will limit the upside, making the trend more volatile.

The AUD is not impossible to rise, but it’s easier to rebound than to stabilize. Truly changing its long-term weakness requires deeper structural shifts—whether through Australia’s economic transformation, a genuine recovery in Chinese demand, or a real reversal of the dollar cycle. Until these changes occur, the AUD is more like a “range-bound currency in rebound” rather than a “trend-level bull.”