Australian dollar dilemma and rebound opportunities: Interpreting the RMB exchange rate trend from a commodity currency perspective

The Australian dollar, as the fifth-largest global trading currency, holds a significant position. The AUD/USD exchange rate is also among the most actively traded in the global forex market, attracting many short-term traders and long-term investors due to its excellent liquidity and extremely tight spreads.

However, over the past decade, this once “darling” has underperformed. From a high of 1.05 in early 2013 to today, the AUD has depreciated by over 35% against the USD. During the same period, the US dollar index rose by 28.35%, and the euro, yen, and Canadian dollar against the dollar also generally depreciated, reflecting a global strong dollar cycle.

The Fate of Commodity Currencies: Why Is the AUD Under Continuous Pressure?

The AUD is called a “commodity currency” due to Australia’s unique economic structure. The export of bulk commodities such as iron ore, coal, and copper supports the entire national economy. This means that any fluctuations in the global raw material markets directly impact the AUD’s exchange rate.

As a former high-yield currency, the AUD has long been favored by arbitrage traders. But after peaking with a 38% surge against the USD during the COVID-19 pandemic in 2020, this attractiveness has gradually diminished each year. Narrowing interest rate differentials, weak commodity demand, and a persistent strengthening dollar—these multiple factors have led to a long-term structural decline in the AUD.

The fourth quarter of 2024 was particularly weak, with an annual decline of about 9.2%. Entering 2025, amid escalating global trade frictions and recession concerns, the AUD/USD even briefly touched 0.5933, hitting a five-year low. Analysts point out that tariffs impacting global trade, declining raw material exports, the difficulty in reversing the Australia-US interest rate spread, and sluggish domestic economic growth have collectively reduced the appeal of Australian assets, leading to continued capital outflows.

Signs of a Turning Point: When Will the AUD Rebound?

In the second half of 2025, signs of a subtle change began to emerge. Sharp rises in iron ore and gold prices, coupled with market expectations of Fed rate cuts, have driven funds back into risk assets. The AUD also appreciated, reaching as high as 0.6636 in September, a high since November 2024. Although the rebound was modest, it marked a shift in market sentiment.

However, whether the AUD can truly “rise back” depends on three key factors:

First, Australia’s domestic economy and central bank stance

Latest data show that Australia’s Consumer Price Index (CPI) rose by 1.3% month-over-month in Q3, exceeding the previous quarter’s 0.7% and surpassing market expectations. The Reserve Bank of Australia (RBA) has issued cautious signals, emphasizing that inflation pressures in housing and services remain stubborn, and that further easing will only be considered once inflation enters a sustainable downward trajectory. This significantly reduces the likelihood of near-term rate cuts and cools expectations for monetary easing.

Second, the direction of the US dollar

The Fed cut the federal funds rate by 25 basis points to a 3.75%-4.00% range in October, but Powell’s subsequent comments dampened market hopes for continued rate cuts. While discussions about dollar depreciation and de-dollarization persist, objective data show the dollar index has rebounded about 3% since bottoming near 96 this summer, demonstrating unexpected resilience. The possibility of breaking through the psychological threshold of 100 is increasing. A strong dollar correlates with a weaker AUD, and this inverse relationship remains difficult to change.

Third, the strength of China’s economic recovery

Australia’s economy is highly dependent on resource exports, with China being its largest trading partner. The pace of China’s economic recovery directly influences demand for Australian iron ore, coal, natural gas, and other raw materials, thereby affecting the AUD’s movement. When China shows robust growth, resource exports and prices tend to rise, boosting confidence in Australian assets. Conversely, if China’s growth slows and the property market remains sluggish, long-term demand for raw materials will decline, and the AUD will weaken due to lack of support.

Diverging Views: Who’s Right About the AUD’s Future?

Faced with uncertainty, global financial institutions have divergent forecasts.

Morgan Stanley remains relatively optimistic, expecting the AUD/USD to rise to 0.72 by the end of 2025. This outlook is based on the possibility that the RBA maintains a hawkish stance and that commodity prices stay strong.

UBS is more cautious, believing that despite Australia’s economic resilience, uncertainties in global trade and potential changes in Fed policy could limit the AUD’s upside, with a forecast near 0.68 by year-end.

The economists at the Commonwealth Bank of Australia offer the most conservative view, suggesting that the recent rebound may be short-lived. They predict the AUD/USD will reach a temporary high in March 2026 but may decline again by the end of 2026. Although the dollar may weaken in 2025, the US economy’s relative strength could lead to a resumption of dollar strength later.

Outlook for the AUD from the RMB Exchange Rate Perspective

The AUD/RMB exchange rate also attracts attention. This currency pair is influenced not only by Australian economic factors but also by Sino-Australian trade relations and the RMB’s own movements.

The RMB exchange rate is more deeply affected by Chinese central bank policies and US-China relations. Recent policy adjustments and trade negotiations will play a significant role in guiding the AUD/RMB. While Chinese economic data show a slight slowdown in services PMI, easing US-China trade tensions help alleviate RMB depreciation pressures.

In the short term, given the relative stability of the RMB, the AUD/RMB is expected to fluctuate within the 4.6-4.75 range. If the RMB weakens due to domestic economic pressures or external factors, the AUD/RMB could briefly rise toward 4.8. However, in the medium to long term, the AUD’s performance closely follows the AUD/USD, and the RMB’s relative stability suggests that the AUD/RMB volatility may be slightly smaller than that of the AUD/USD.

Exchange Rate Forecast: Multi-Timeframe Analysis

Short-term outlook (1-3 weeks): Range-bound with potential breakout and follow-through

The AUD/USD currently fluctuates between 0.63 and 0.66. A bullish move could occur if the price breaks above 0.6450 resistance, targeting the 200-day moving average at 0.6464, and further toward the psychological level of 0.6500. Catalysts include weaker-than-expected US GDP or non-farm payroll data (implying increased rate cut probability), or a hotter-than-expected Australian CPI. Stop-loss should be set below 0.6420.

A bearish move could happen if the price falls below support at 0.6373, targeting recent lows around 0.6336 or 0.6300. Triggers include strong US data or a significant cooling of Australian inflation. Stop-loss should be above 0.6400.

Medium-term outlook (1-3 months): Trend-following, with policy shifts as key drivers

A bullish scenario requires: increased expectations of Fed rate cuts (weak employment data, falling inflation), easing trade tensions. Under this scenario, the AUD could benefit from risk sentiment recovery, targeting 0.6550-0.6600. A break above the 200-day moving average would confirm a medium-term reversal, suggesting a good entry point.

A bearish scenario warrants caution: rising Australian inflation forcing the RBA to turn hawkish, unexpected US dollar weakness, or geopolitical events triggering risk aversion.

Long-term positioning (beyond 3 months): Accumulating on dips

Long-term investors bullish on the AUD can consider scaling into positions on current lows, smoothing out market volatility over time. This strategy is especially effective once a confirmed uptrend is established.

Trading Opportunities and Risk Warnings

The volatility of the AUD offers trading opportunities but also entails risks. Rational traders should:

1. Closely monitor economic data: Australian CPI, employment, GDP, and US data are equally important; their relative performance determines the AUD’s direction.

2. Pay attention to central bank signals: RBA’s stance often leads market expectations; early detection of signals can provide an advantage.

3. Do not ignore commodity markets: As a commodity currency, the AUD is highly correlated with iron ore, gold prices, and other commodities; shifts in these markets often precede reversals in the AUD.

4. Beware of USD rebound risks: The dollar’s resilience exceeds expectations; any assumptions of dollar weakness should be carefully validated.

5. Consider Chinese factors: Chinese economic data and trade policy adjustments impact the AUD as much as domestic factors do.

Currently, the AUD is at a technical crossroads amid fundamental debates. Investors should remain flexible, balancing potential rebounds with downside risks. All forex trading involves risks, including the possibility of losing part or all of the invested capital; prudent operation is essential.