AUD and TWD trends have been weak over the past decade. Can a rebound break the long-term suppression pattern?

The Australian dollar is the fifth most traded currency globally (after USD, EUR, JPY, GBP). The AUD/USD pair is also one of the top five most active currency pairs worldwide. The AUD has long been regarded as a high-yield currency and a common target for carry trades. However, on a longer time scale, the performance of the AUD over the past decade has been quite weak, with only certain periods showing significant rebounds.

Over 35% decline in ten years, why does the AUD/TWD trend continue to remain under pressure?

Starting from the early 2013 level of 1.05, the AUD/USD has depreciated over 35% from 2013 to 2023, while the US Dollar Index (DXY) has risen by 28.35% during the same period. The euro, yen, and Canadian dollar have also shown a trend of weakening against the US dollar, indicating a broad-based strong dollar cycle.

The evolution of the AUD/TWD trend over the past decade can be divided into several distinct phases:

2009–2011: Strong Chinese Recovery Supports Commodity prices surged, Australian interest rates were significantly higher than those in the US, and AUD/USD rose close to 1.05.

2020–2022: Global Commodity Bull Market and Rapid Rate Hikes During this period, Australia’s relatively stable pandemic control, strong demand from Asian markets for bulk commodities like iron ore, and central bank policies jointly drove the AUD to appreciate sharply against the dollar by about 38% within a year, briefly breaking above 0.80. However, most of the time afterward, the AUD remained in consolidation or a weaker trend.

2023–2024: Weak Chinese Recovery and Converging Interest Differentials China’s economic growth slowed, with volatile high-levels, and interest rate differentials contracted, leading to a prolonged weak trend in the AUD.

2025–2026 (Observation): Rate Cuts and Commodity Rebound From the second half of 2025, iron ore and gold prices surged, coupled with the US Federal Reserve cutting rates, which drove capital flows into risk assets, causing the AUD to fluctuate higher. The AUD/USD once reached 0.6636, and overall in 2025, the AUD appreciated by about 5–7%. However, on a longer-term scale, the AUD trend remains relatively weak.

Why are each of these rebounds difficult to sustain? Core obstacle analysis

Whenever the AUD approaches previous highs, market selling pressure increases significantly, indicating limited confidence in the currency. The main reasons include:

Deteriorating Global Trade Environment US tariffs impact global trade, leading to declines in raw material exports (metals, energy), which undermines the commodity currency status of the AUD.

Difficulty Reversing Interest Rate Advantage The interest rate differential between the US and Australia remains challenging to turn around. Australia’s domestic economy remains sluggish, resulting in relatively low asset attractiveness.

Lack of Internal Growth Momentum From a medium- to long-term perspective, the AUD behaves more like a “rebound but lacking a trend” currency. Without clear growth drivers or interest rate advantages, the AUD’s movements are more influenced by external factors rather than fundamentals, which is a core reason why markets remain cautious about the AUD.

Three decisive factors influencing the AUD/TWD trend

In the medium to long term, the AUD’s trend is determined by multiple factors. Investors seeking to grasp the bullish or bearish shifts should focus on these three key factors:

1. RBA Interest Rate Policy: Will the interest rate differential regain its advantage?

The long-term attractiveness of the AUD heavily depends on the interest rate structure. Currently, the Reserve Bank of Australia (RBA) cash rate is about 3.60%. The market is gradually shifting expectations toward “possible rate hikes again by 2026,” with the Commonwealth Bank of Australia forecasting a peak rate potentially reaching 3.85%.

If inflation remains sticky and the employment market stays resilient, a hawkish stance from the RBA will help rebuild the interest rate advantage for the AUD; conversely, if rate hike expectations falter, the AUD’s support will weaken significantly.

2. China’s Economy and Commodity Prices: External Drivers for the AUD

Australia’s export structure is highly concentrated in iron ore, coal, and energy, making the AUD essentially a commodity currency. China’s demand is the most critical variable.

When China’s infrastructure and manufacturing activity rebound, iron ore prices tend to strengthen simultaneously, and the AUD usually reflects this quickly in the exchange rate. Conversely, if China’s recovery falters, even short-term commodity rebounds may lead to “spikes followed by declines” in the AUD.

3. US Dollar Trend and Global Risk Sentiment: Determining Capital Flows

The Federal Reserve’s policy cycle remains the core driver of the global FX market. In a rate-cutting environment, a weakening dollar generally benefits risk assets, and the AUD benefits accordingly; but if risk aversion rises and capital flows back into the dollar, the AUD can weaken even if fundamentals are stable.

Recently, market sentiment has slightly improved, but energy prices and global demand remain weak, leading investors to prefer safe-haven assets over cyclical currencies like the AUD, limiting its upside potential.

In summary, for the AUD to break out into a genuine medium- to long-term bull trend, three conditions must be met simultaneously: the RBA adopts a hawkish stance again, China’s demand substantially improves, and the dollar enters a structural weakening phase. If only one of these is present, the AUD is more likely to stay in a range rather than trend upward.

Outlook and institutional views on the AUD beyond 2026

The key to the AUD’s future trend lies in whether the “rebound can turn into a trend.” Major institutions have diverging views:

Optimistic Outlook Morgan Stanley expects the AUD/USD to possibly rise to 0.72 by the end of 2025. This forecast is mainly based on the RBA maintaining a hawkish stance and a strengthening of commodity prices.

Traders Union’s statistical model projects an average of about 0.6875 (range 0.6738–0.7012) by the end of 2026, rising further to 0.725 by the end of 2027, emphasizing strong Australian labor markets and a recovery in commodity demand.

Neutral to Cautious Outlook UBS’s view is more conservative. They believe that despite resilience in Australia’s economy, global trade uncertainties and potential changes in Fed policy could limit the AUD’s upside, with forecasts around 0.68 at year-end.

CBA Economists recently issued a more cautious outlook, suggesting that the AUD’s recovery might be short-lived. 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 dollar remains super-strong (due to interest rate differentials), the AUD will struggle to break through 0.67.

Personal observation From a medium- to long-term perspective of the AUD/TWD trend, in the first half of 2026, the AUD is likely to oscillate between 0.68 and 0.70, influenced by Chinese data and US non-farm payrolls. The AUD will not crash sharply because Australia’s fundamentals are solid and the RBA remains relatively hawkish, but it also won’t surge to 1.0 (due to structural dollar strength). Short-term pressures mainly stem from Chinese data, while long-term positives include resource exports and commodity cycles.

Investment considerations for the AUD

The AUD/USD is one of the top five most traded forex pairs globally, with many factors influencing its movement. Although currency exchange rates are inherently difficult to predict, the characteristics of the Australian dollar—high liquidity and clear patterns—make analyzing its trend relatively straightforward.

All investments carry risks. Forex trading is a high-risk activity, and investors may lose all their capital. It is recommended that traders fully understand market risks before engaging in forex trading and develop strategies aligned with their risk tolerance.

Conclusion on AUD trend

As a “commodity currency” of a major resource-exporting country, the AUD’s properties remain evident, especially its high correlation with prices of copper, iron ore, coal, and other raw materials.

Based on market analysis, in the short term, the hawkish stance of the RBA and strong commodity prices will provide support. However, in the medium to long term, global economic uncertainties and potential rebounds in the dollar will limit the upside and may lead to more volatile movements.

While FX markets are inherently volatile and difficult to forecast precisely, the AUD’s high liquidity, strong volatility patterns, and its economic structure make the medium- to long-term trend judgment more accessible. Maintaining rational analysis of the AUD’s future, combined with personal investment goals, is the prudent approach to investing.