Why does the AUD continue to remain under pressure? 2025 Outlook for key exchange rates like AUD to MYR and others

The Australian dollar is the fifth-largest traded currency globally (after the US dollar, euro, Japanese yen, and British pound). As one of the most actively traded currency pairs in the world, AUD/USD is known for ample liquidity and tight spreads, attracting a large number of short-term traders and medium- to long-term investors.

However, if you follow the AUD trend, you’ll notice a phenomenon: Although the AUD is a high-yield currency and should theoretically attract significant capital inflows, it has been depreciating continuously over the past decade. The underlying reasons are complex and profound.

The True Reflection of a 35% Depreciation in the AUD Over Ten Years

The AUD is a typical “commodity currency.” Australia’s economy heavily relies on exports of iron ore, coal, copper, and other bulk commodities. As long as global raw material prices fluctuate, the AUD exchange rate will experience sharp movements.

From the 1.05 level in early 2013 to the end of 2023, the AUD has depreciated by over 35% against the USD. During the same period, the US Dollar Index (DXY) rose by 28.35%, and the euro, yen, and Canadian dollar also depreciated against the dollar. What does this indicate? A comprehensive strong dollar cycle is underway.

In Q4 2024, the AUD’s decline intensified, with an annual depreciation of about 9.2%. Entering 2025, due to escalating trade tensions and recession fears, the AUD briefly dropped to 0.5933, hitting a five-year low. Analysts point out key factors including:

• US tariff policies impacting global trade patterns
• Decline in demand for Australian raw materials (metals, energy)
• The difficulty in reversing the Australia-US interest rate differential, reducing the attractiveness of Australian assets
• Continuous net capital outflows from Australia

Can the AUD Rebound and Stabilize at High Levels? Three Key Variables

(1) Shift in Australian Economy and Central Bank Policies

In Q3 2025, Australia’s CPI rose by 1.3% month-over-month, far exceeding expectations. The Reserve Bank of Australia (RBA) maintained interest rates at 3.6% in November, signaling caution and emphasizing the difficulty of controlling inflation. This suggests a significantly reduced likelihood of rate cuts in the short term, providing temporary support for the AUD.

However, whether this support can last depends on subsequent inflation data. If inflation remains high, the RBA will be forced to stay hawkish; if inflation cools, expectations of rate cuts will rise, and the AUD could come under renewed pressure.

(2) How Resilient is the US Dollar?

In October, the Federal Reserve announced a rate cut to the 3.75%-4.00% range, marking the second cut of the year. However, Chair Powell’s subsequent comments dampened expectations for a December rate cut. The US Dollar Index, after bottoming near 96 in summer, has rebounded about 3%, and may break through the key psychological level of 100.

A strong dollar generally weakens the AUD—that’s the market’s iron law. The current resilience of the dollar exerts ongoing downward pressure on the AUD.

(3) The Strength of China’s Economic Recovery

Australia’s largest buyers of iron ore, coal, and natural gas are China. When China’s economy is robust, demand for raw materials surges, directly boosting the AUD; if China’s recovery slows or the property market remains weak, Australian exports will decline sharply, removing a key support for the AUD.

Mainstream Institutional Forecasts for AUD’s Year-End Trend

Analysts on Wall Street have differing views on the AUD’s future:

Morgan Stanley is relatively optimistic, expecting the AUD to rise to around 0.72 by year-end, citing the possibility of the RBA maintaining a hawkish stance and strengthening commodity prices.

UBS adopts a cautious outlook, believing global trade uncertainties and Fed policy shifts will limit the AUD’s upside, projecting a year-end level around 0.68.

Australian bank economists are the most conservative, suggesting the AUD’s rebound may be short-lived, expecting it to peak around March 2026 before declining again. They anticipate that although the dollar may be relatively weak in 2025, the US economy’s faster growth compared to other developed economies will lead to a dollar rebound in 2026.

Overall view: The AUD may fluctuate within the 0.63-0.66 range.

Breakdown of AUD’s Performance Against Major Currencies

AUD/USD Short-term Forecast: Fluctuation within 0.63-0.66

If inflation data is positive and the economy remains stable, the AUD may test above 0.66. Conversely, if global risk sentiment worsens and the dollar rebounds, the AUD could fall back to 0.63 or lower. Key indicators to watch are US GDP, non-farm payrolls, and Australia’s CPI data.

AUD/CNY Trend: Fluctuation within 4.6-4.75

Because the RMB tends to be relatively stable, AUD/CNY usually exhibits smaller fluctuations than AUD/USD. However, this depends on stable Sino-Australian trade. If the RMB depreciates due to Chinese economic pressures or US-China relations, the AUD could temporarily rise toward 4.8. The focus should be on Chinese economic data and central bank policies.

AUD/MYR Performance: Main fluctuation zone around 3.0-3.15

This is an often-overlooked trading pair. Malaysia’s economy also relies on exports and raw materials, with the ringgit sensitive to commodity prices. Weak Australian economic data will limit the AUD’s rebound potential. If Australia’s economic situation worsens further, the AUD/MYR could test support near 3.0. Traders interested in Asian currencies should pay attention.

Trading Strategies for Different Cycles

Short-term (1-3 days): Focus on Breakouts

Long conditions: Buy AUD/USD if it stabilizes above 0.6450, targeting the psychological level of 0.6500. Triggers include weaker-than-expected US economic data or unexpectedly strong Australian CPI. Stop-loss at 0.6420.

Short conditions: Short if it breaks below 0.6373 support, targeting 0.6336 or even 0.6300. Triggers include strong US data or a significant cooling of Australian CPI. Stop-loss at 0.6400.

Key tip: Be cautious before data releases; reduce positions ahead of Fed decisions, US GDP, and Australian CPI announcements.

Medium-term (1-3 weeks): Trend Following

Bullish scenario: Expectations of Fed rate cuts increase (weak employment data, falling inflation), combined with easing trade tensions, could push the AUD to 0.6550-0.6600.

Bearish scenario: US economic resilience exceeds expectations, delaying Fed rate cuts, with the AUD dropping toward 0.6250 (near the year’s low). Escalating trade conflicts or weak Chinese data can accelerate declines.

Long-term Holding: Gradual Positioning to Smooth Volatility

If bullish on the AUD long-term, consider accumulating in phases at current lows, using time to absorb market fluctuations. Wait for confirmation of an uptrend before increasing positions.

Risks Investors Must Understand

The AUD is highly volatile; all investment decisions should be made with full risk awareness. Forex trading is a high-risk activity, and investors may lose all or most of their capital.

Market sentiment can change rapidly. Although liquidity is ample, slippage can occur during black swan events. Traders should reassess their positions before each data release and adjust stop-loss levels flexibly.

Key Recommendations Summary:

1. Expect increased short-term volatility in the AUD, focus on global trade policies and commodity prices.
2. The future direction of the RBA is critical; only a softening inflation outlook can open the door for rate cuts.
3. Watch AUD against MYR and other non-USD currencies for overlooked trading opportunities.
4. Maintain strict risk discipline in both long and short trades, enforce stop-loss orders diligently.

Currently, the AUD is in a stage of technical and fundamental tug-of-war, with the key zone between 0.6370 and 0.6450. Short-term trading should focus on the range, with breakout follow-up. The ultimate trend depends on signals from Fed policy shifts and whether global trade risks are substantially alleviated.