## Australian Dollar Trend Over 20 Years: Why Has It Been Under Pressure Long-Term? How Should NT$ Investors View It?

**The Australian dollar is one of the top five most traded currencies globally** (second only to USD, EUR, JPY, GBP). The "AUD/USD" currency pair ranks among the top five in global trading activity, offering high liquidity and low spreads, making it very suitable for short-term trading or medium- to long-term positioning. Notably, the AUD has traditionally been classified as a **high-yield currency**, often used in carry trade strategies. However, from a long-term perspective, the AUD has performed quite weakly over the past decade, with only occasional sharp rebounds.

**2020, during the pandemic, marked a turning point.** At that time, Australia's relatively effective pandemic control, strong demand for commodities like iron ore in Asian markets, and supportive policies from the Reserve Bank of Australia (RBA) jointly drove the AUD/USD to appreciate sharply by about 38% within a year. Since then, however, the AUD has mostly remained in consolidation or under pressure.

In the second half of 2025, iron ore and gold prices surged significantly, and the Federal Reserve's rate cuts attracted capital flows into risk assets, causing the AUD to fluctuate and strengthen. The AUD briefly rose above 0.6636, with an annual gain of about **5-7%**. Yet, on a longer cycle, the fundamental outlook for the AUD remains relatively fragile.

## Why Has the AUD Been Persistently Weak Over 20 Years? The Dual Dilemma of Commodity Demand and Dollar Strength

**Over the past decade, the AUD has been under continuous pressure, with diminishing appeal of high yields and declining commodity demand.**

Starting from a level of 1.05 in early 2013, the AUD depreciated by over 35% through 2023, while the US dollar index (DXY) rose by 28.35%. Meanwhile, major currencies like the euro, yen, and CAD also depreciated against the dollar, reflecting a **broad-based dollar strengthening cycle**. From both technical and fundamental perspectives, the AUD remains in a relatively unfavorable environment, which explains why rebounds are often short-lived and struggle to sustain high levels.

**Key periods of AUD movement comparison:**

| Period | Core Background | Commodity Prices | Interest Rate Differential | Performance |
|---------|-------------------|------------------|------------------------------|--------------|
| 2009-2011 | China's rapid recovery | Significant rise | Australia higher than US | Approached 1.05 |
| 2020-2022 | Global commodities boom | Iron ore at record highs | Rapid rate hikes | Briefly broke below 0.80 |
| 2023-2024 | China's sluggish recovery | High volatility | Narrowing interest rate gap | Long-term weakness |
| 2025-2026(Forecast) | Rate cuts + commodity rebound | Rebound momentum | Potential widening of interest gap | Decisive for strength |

Whenever the AUD approaches previous highs, selling pressure increases, indicating limited confidence in the currency. The main reasons include: **US tariff policies impacting global trade, pressure on raw material exports (metals, energy), weakening the commodity currency characteristic of the AUD; difficulty in reversing the US-Australia interest rate differential; sluggish domestic economic growth and declining asset attractiveness.**

In the medium to long term, the AUD resembles a "rebound but lacking a clear trend" currency. Without strong growth drivers and interest rate advantages, its movements are often dominated by external factors rather than fundamentals, which is the core reason markets remain cautious about the AUD.

## Key Drivers of AUD Movement: A Complete Analysis of Three Major Factors

Investors seeking to understand the bullish or bearish shifts in the AUD need to monitor these three core indicators:

### 1. RBA Monetary Policy: Can the Interest Rate Differential Be Rebuilt to Restore Competitiveness?

As a high-yield currency, the AUD's attractiveness heavily depends on the interest rate differential structure. Currently, the RBA's cash rate is about 3.60%, with market expectations gradually shifting toward "another rate hike in 2026." The Commonwealth Bank of Australia (CBA) forecasts a peak rate possibly reaching 3.85%.

If inflation remains sticky and the employment market stays resilient, the RBA's hawkish stance will help the AUD rebuild its interest rate advantage; conversely, if rate hikes are not realized, the AUD's support will weaken significantly.

### 2. China’s Economy and Commodity Prices: External Drivers Are Crucial

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 infrastructure and manufacturing activity in China pick up, iron ore prices tend to rise in tandem, quickly reflecting in the AUD exchange rate; if China's recovery falters, even short-term commodity rebounds may lead to "spikes followed by declines" in the AUD.

### 3. US Dollar Trends and Global Risk Sentiment: The Deciders of Capital Flows

From a capital flow perspective, the Federal Reserve's policy cycle remains central to the global FX market. In a rate-cut environment, a weaker dollar generally benefits risk currencies, including the AUD; but if risk aversion rises and capital flows back into USD, the AUD can weaken even if fundamentals are stable.

Recently, market sentiment has slightly improved, but energy prices and global demand remain uncertain. Investors tend to favor safe-haven assets over cyclical currencies like the AUD, limiting its upside potential.

**Overall**, for the AUD to break out into a genuine medium- to long-term bull trend, three conditions must be met simultaneously: the RBA returning to a hawkish stance, a substantial improvement in Chinese demand, and a structural decline in the US dollar. Meeting only one or two of these conditions will likely result in the AUD remaining in a range-bound or sideways pattern rather than a sustained rally.

## Outlook for AUD and NT$: Forecast Pathways Beyond 2026

The key to the AUD's future trajectory is whether a "rebound can turn into a trend." Most market analysts agree: the AUD has room for short-term correction, but a strong bullish trend requires clearer macro conditions.

**Different institutions' forecasts vary:**

Morgan Stanley expects the AUD/USD to possibly rise to 0.72 by the end of 2025, supported by the RBA's hawkish stance and rising commodity prices.

Traders Union's models project 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, emphasizing Australia's resilient labor market and commodity demand recovery. These optimistic forecasts share a common basis: a soft landing for the US economy and a decline in the dollar index would benefit commodity currencies like the AUD.

UBS holds a more conservative view, believing that despite Australia's economic resilience, global trade uncertainties and Fed policy shifts could limit the AUD's gains, with an expected exchange rate around 0.68 by year-end.

CBA economists recently expressed a cautious outlook, suggesting the AUD's recovery might be short-lived. **They forecast the AUD/USD to peak around March 2026 but possibly fall back again by year-end.**

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

**Personal observation**: 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 probably won't decline sharply because of Australia's solid fundamentals and the RBA's relatively hawkish stance, but it also won't surge to 1.0 (as structural dollar strength persists). Short-term pressures mainly stem from Chinese data, while long-term positives include resource exports and commodity cycles.

## Investing in AUD: Understanding Market Characteristics and Trading Mechanisms

The AUD/USD is among the top five most traded forex pairs worldwide, with many influencing factors on its exchange rate. Although currency prices are inherently difficult to predict precisely and models have limited short-term effectiveness, the distinctive features of the Australian dollar—such as high liquidity and clear cyclical patterns—make medium- and long-term trend analysis relatively straightforward.

As a commodity-exporting currency, the AUD's "commodity currency" attribute is prominent, closely linked to prices of copper, iron ore, coal, and other raw materials. Market analysis suggests that in the short term, the hawkish stance of the RBA and strong raw material prices will provide support. However, in the medium to long term, global economic uncertainties and potential USD rebounds could limit the upside and cause volatility.

While FX markets are volatile and difficult to forecast accurately, the AUD's high liquidity, strong cyclical patterns, and economic structure make medium- and long-term trend judgments more manageable.

**The AUD/NT$ relationship tends to be positively correlated with the AUD/USD trend**, and the NT$'s performance against the USD will also influence the AUD/NT$ exchange rate. Investors should pay attention to both the AUD and USD/NT$ movements when analyzing the AUD outlook.