## AUD depreciated 35% over ten years: An in-depth analysis from historic lows to rebound challenges

The Australian dollar is the fifth most traded currency globally, and AUD/USD ranks among the top five most active forex pairs, known for its liquidity and tight spreads. However, over the past decade, the AUD's performance has been consistently disappointing.

Starting from early 2013 at around 1.05, the AUD/USD has depreciated by over 35% as of 2023. During the same period, the US dollar index rose by 28%, and major currencies like the euro, yen, and Canadian dollar also depreciated against the dollar. This is not an issue unique to the AUD but a result of the entire global economy entering a **strong dollar cycle**.

Although the AUD rebounded to 0.6636 in 2025, gaining about 5-7%, from a longer-term perspective, the shadow of its **all-time low** remains, and market confidence remains limited. Whenever the AUD approaches previous highs, selling pressure increases significantly, reflecting cautious investor sentiment toward the currency.

## Three fundamental reasons for the long-term weakness of the AUD

**First: Commodity demand cycle peaks**

Australia's export structure heavily depends on bulk commodities like iron ore, coal, and energy. When China's economy is strong, the AUD typically benefits the most. The COVID-19 pandemic in 2020 is a classic example—Australia's relatively stable pandemic control, combined with robust demand from Asian markets, caused the AUD to surge by 38% within a year.

However, since 2023, China's economic recovery has shown clear signs of weakness. Even when commodity prices rebound temporarily, the AUD often exhibits a "spike and fall" pattern, unable to sustain strength. Declining raw material exports have also undermined the AUD's status as a commodity currency.

**Second: Disappearance of interest rate advantage**

The AUD has long been regarded as a high-yield currency, with carry trades attracting hot money. Currently, the Reserve Bank of Australia (RBA) cash rate is about 3.60%, with market expectations of another rate hike possibly reaching 3.85% in 2026.

However, although the Federal Reserve has cut rates, the USD's dominant position makes it difficult for the interest rate differential to reverse. Australia's sluggish economy further weakens asset attractiveness. The once advantageous interest rate spread has vanished, leaving the AUD without long-term support.

**Third: US tariff policies impact global trade**

US tariff policies influence global trade patterns, putting pressure on metal and energy exports. This poses a direct threat to Australia's economy, which relies heavily on commodity exports. Uncertainty in the trade environment further limits the AUD's upside potential.

## Three key factors influencing the future trend of the AUD

Investors seeking to grasp the bullish or bearish turns of the AUD should monitor the following three aspects:

**Factor 1: The hawkish stance of RBA monetary policy**

The long-term attractiveness of the AUD depends on the interest rate differential. If inflation remains sticky and the employment market stays resilient, a hawkish RBA stance will help rebuild the interest rate advantage, supporting the exchange rate. Conversely, if rate hike expectations falter, the AUD's support will weaken significantly.

**Factor 2: China's economic momentum and commodity prices**

The AUD is essentially a commodity currency, with Chinese demand being the most critical variable. When China's infrastructure and manufacturing activities rebound, iron ore prices tend to rise in tandem, quickly reflecting in the AUD exchange rate. The surge in iron ore and gold prices in late 2025 was a major driver of the AUD's rebound.

**Factor 3: US dollar trend and global risk sentiment**

The Fed's policy cycle is central to the global forex market. In a rate-cut environment, a weakening USD generally benefits risk currencies like the AUD. However, if risk aversion increases and capital flows back into the USD, the AUD can come under pressure even if its fundamentals are stable. Recent energy price trends and weak global demand remain pessimistic, with investors favoring safe-haven assets over cyclical currencies.

## Divergent forecasts from major institutions on the AUD's future

Whether the AUD can break out into a genuine medium- to long-term bull run depends on three simultaneous conditions: the RBA returning to a hawkish stance, a substantial improvement in Chinese demand, and a structural weakening of the USD.

**Optimistic forecasts**

Morgan Stanley predicts the AUD/USD could rise to 0.72 by the end of 2025. This outlook is based on the RBA maintaining a hawkish stance and a rally in commodity prices.

Traders Union's statistical model projects an average of about 0.6875 by the end of 2026 (range 0.6738-0.7012), rising further to 0.725 by the end of 2027. All these forecasts assume that if the US economy soft-lands and the dollar index declines, commodity currencies will benefit.

**Cautious forecasts**

UBS believes that despite resilience in Australia's economy, uncertainties in global trade and potential changes in Fed policy could limit the AUD's gains, with the exchange rate expected to stay around 0.68 by year-end.

The Commonwealth Bank of Australia’s economists are more cautious, suggesting the AUD's recovery may be temporary. They forecast the AUD/USD to peak around March 2026 but possibly fall again by the end of 2026.

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

**Medium-term outlook**

Overall, in the first half of 2026, the AUD is likely to fluctuate between 0.68 and 0.70, influenced by Chinese data and US non-farm payrolls. The AUD won't crash sharply because of Australia's solid fundamentals and the relatively hawkish RBA, but it will also find it difficult to surge higher (due to structural USD strength). Short-term pressures mainly stem from Chinese economic data, while long-term positives include resource exports and commodity cycles.

## Opportunities and risks in AUD trading

AUD/USD's high liquidity and strong volatility make it relatively easier to judge medium- to long-term trends. Forex margin trading offers investors flexible participation—long and short positions, leverage, and low entry barriers—suitable for small and medium investors.

However, it is crucial to emphasize that all investments carry risks. Forex trading is high-risk, and investors may lose all their capital. Before participating, one should fully understand market mechanisms and risk management strategies.

## Summary: The "rebound trap" of the AUD and medium- to long-term outlook

As a commodity currency, the AUD remains highly correlated with prices of iron ore, copper, coal, and other raw materials. In the short term, hawkish RBA policies and strong commodity prices will provide support.

But in the medium to long term, global economic uncertainties and potential USD rebound could limit the upside and cause volatile movements. The AUD is more likely to stay within a range rather than trend unilaterally higher. Forex markets are volatile and difficult to predict precisely; investors should remain cautious and make decisions based on their risk tolerance.