Is the Australian dollar under downward pressure? Analyzing the current AUD exchange rate trend and trading opportunities

Recently, the Australian dollar can be described as “turbulent.” As the fifth-largest traded currency globally, AUD/USD was once a favorite among investors, but its performance over the past decade has disappointed many. From an early 2013 level of 1.05 to now, it has fallen by over 35%, while the US dollar index has risen by more than 28% during the same period. The question is—does the AUD still have a chance to rebound? This is especially critical for investors holding or monitoring the AUD to RMB exchange rate.

Why has the AUD fallen into a long-term weakness?

When talking about the AUD, the characteristic of a commodity currency must be considered. Australia’s economy is highly dependent on exports of iron ore, coal, copper, and other bulk commodities. Fluctuations in global raw material prices cause the AUD to shake. This isn’t necessarily a bad thing; the problem is that the global trade environment has changed over the past ten years.

Starting in Q4 2024, the AUD plunged 9.2% against the USD, and by 2025, it briefly dropped to a five-year low of 0.5933. The main culprit is clear: the US tariffs policy has intensified, suppressing global trade, leading to a decline in raw material exports, and reducing the attractiveness of Australian assets. Additionally, the interest rate differential between Australia and the US remains difficult to reverse, causing hot money to flow out of Australia.

What’s more painful is that the Reserve Bank of Australia (RBA) has been fighting inflation, which has limited the possibility of rate cuts. In Q3, Australia’s CPI rose 1.3% month-over-month, far exceeding expectations, prompting the RBA to remain cautious. This policy divergence has made the AUD appear particularly weak against the US dollar.

Are there signs of a rebound?

Don’t worry, the story isn’t over yet. In September, the AUD briefly showed a glimmer of hope—iron ore and gold prices surged, and expectations of Fed rate cuts increased. The AUD/USD rose to a high of 0.6636, the highest since November 2024. This injected confidence into the market.

However, subsequent volatility indicates that this rebound is unstable. Currently, the AUD hovers around 0.64, with investors divided on its future direction: Morgan Stanley sees hope, expecting it to rise to 0.72 by year-end; UBS is more cautious, considering 0.68 a good level; while CBA economists are the most pessimistic, believing this rebound may be a fleeting phenomenon.

Three key factors that will determine the AUD’s future

To accurately judge the AUD’s trajectory, focus on these three factors:

China’s economic performance is paramount. Australia’s iron ore and coal are mainly sold to China. A strong Chinese economic recovery can boost demand for Australian commodities, while a slowdown would weigh on the AUD. Currently, China faces downward pressure, with the real estate market remaining sluggish, which exerts long-term pressure on the AUD.

The strength of the US dollar also has a significant impact. The pace of Fed rate cuts and US economic data directly influence the dollar’s movement. A strong dollar means a weaker AUD, and vice versa. The US dollar index has rebounded from 96, with a rising likelihood of breaking above 100, which is unfavorable for the AUD.

The policy shift of the RBA is a short-term variable. The RBA currently maintains a 3.6% interest rate, emphasizing inflation exceeding expectations. But if inflation gradually falls and economic pressures increase, expectations of rate cuts will rise, which could support the AUD.

What about the AUD to RMB exchange rate?

Looking beyond AUD/USD, investors are more concerned with the AUD to RMB exchange rate. Currently, AUD/CNY fluctuates between 4.6 and 4.75. The movement of this currency pair is influenced by three factors:

First, the performance of the AUD itself, which depends on the three factors mentioned above. Second, the RMB’s trend, affected by Chinese central bank policies and US-China trade negotiations. Third, the relative economic conditions of both countries—Australia’s economy remains weak, China’s economy is also adjusting, but the RMB remains relatively stable, so the AUD/CNY may have less volatility than AUD/USD.

In the short term, if the RMB weakens due to domestic or external factors, AUD/CNY could rise toward 4.8; but if Australian economic data continue to disappoint, it may test lower support levels.

How to formulate trading strategies?

Short-term (1-3 days): Focus on range trading. The key levels for AUD/USD are 0.6370-0.6450. If the price breaks above 0.6450, consider going long with a target of 0.6500; if it falls below 0.6373, consider shorting toward 0.6336. It’s best to reduce positions before data releases, as volatility may increase.

Medium-term (1-3 weeks): Monitor two main signals. First, whether the Fed truly begins a rate cut cycle—if US employment data weaken and inflation recedes, the AUD could rise to 0.6550-0.6600. Second, Australia’s economic data and RBA stance—if inflation surges again and the RBA turns hawkish, the AUD could strengthen. Conversely, if the US economy proves more resilient than expected, the dollar may rebound, and the AUD could test 0.6250.

Long-term holding: If bullish on the AUD, current lows could be an opportunity to build positions gradually. Use time to smooth out volatility and wait for trend confirmation.

Final thoughts

The AUD is currently caught between technical and fundamental forces. In the short term, key factors are US economic data and whether Australian inflation continues to decline. The medium to long-term direction depends on whether global trade conditions ease, China’s economy recovers, and the RBA shifts policy.

For investors focusing on the AUD to RMB exchange rate, it’s important to watch China-Australia trade policies and RMB trends. The current range of 4.6-4.75 could see the AUD/CNY rise to 4.8 or fall back toward 4.5—everything depends on the relative changes in the economies and policies of these two countries.

Remember, all forex trading involves risks. Investors should adjust their strategies flexibly according to their risk tolerance and avoid blindly chasing gains or panicking during dips.