AUD movement over ten years: Why does it continue to stay under pressure, and when will the reversal opportunity appear?

As the world’s fifth-largest trading currency, the Australian dollar’s movements often attract market attention. However, when viewed over a longer time frame, the AUD’s performance over the past decade has been quite disappointing. From an initial level of 1.05 in early 2013 to now, the AUD/USD has depreciated by over 35%, making it one of the weakest among major global currencies. This reflects not only the Australian dollar’s own difficulties but also deep structural changes in the global economic landscape.

The AUD is widely traded not only because of its liquidity and low spreads but also due to its status as a “high-yield currency,” making it a popular target for carry trades. However, over the ten-year long-term horizon, these attractions have gradually faded. Particularly, the two main drivers that once supported the AUD—interest rate differentials and demand for commodities—have both fallen into trouble, which is the fundamental reason for the AUD’s prolonged weakness.

A Decade of Over 30% Depreciation: How the AUD Entered a Weakness Pattern

Comparing the AUD’s ten-year trend with other major currencies reveals a clearer picture of its relative predicament. During the same period, the US dollar index rose by 28.35%, while the euro, yen, and Canadian dollar all depreciated against the dollar. This indicates that the AUD’s weakness is not an isolated phenomenon but a microcosm of the broader “strong dollar cycle.”

However, the depreciation of over 35% far exceeds that of other currencies, warranting deeper analysis. The key lies in a fundamental shift in Australia’s economic fundamentals. From 2013 to 2023, China’s economic growth slowed, infrastructure investment cooled, and demand for raw materials like iron ore and coal sharply declined. As the world’s largest iron ore exporter, Australia’s economic fate is highly linked to Chinese demand, making it difficult for the AUD to benefit from commodity price increases.

Notably, there was a significant rebound during the COVID-19 pandemic in 2020. At that time, Australia’s pandemic control was relatively stable, demand for commodities in Asia temporarily rebounded, and the Reserve Bank of Australia (RBA) implemented supportive policies, collectively pushing the AUD/USD up by about 38% within a year. But this rebound was short-lived—post-2020, the AUD fell back into consolidation and weakness, illustrating the fragility of the rally.

Commodity Prices and the Dollar: The Line of Destiny for the AUD

The decade-long rise and fall of the AUD can be explained simply: when commodity prices are strong and the dollar is relatively weak, the AUD tends to benefit from dual support; conversely, if commodities weaken or the dollar strengthens, the AUD is quickly sold off. This is why the AUD is often called a “commodity currency.”

Starting in the second half of 2025, markets saw a glimmer of hope. Iron ore and gold prices surged, the Federal Reserve entered a rate-cut cycle, and risk assets attracted capital inflows. The AUD/USD briefly rose to 0.6636, up 5-7% from the beginning of the year. However, this rally faced resistance—each time the AUD approached previous highs, selling pressure increased, indicating market confidence in the AUD remains limited.

Analysts believe the main reasons include: US tariff policies impacting global trade, uncertain prospects for raw material exports, difficulty in reversing Australia’s interest rate advantage over the US, sluggish domestic economic growth, and relatively low asset attractiveness. Therefore, the AUD is more like a “rebound but lacking a trend” currency, heavily influenced by external factors rather than its own fundamentals.

Three Core Drivers: Keys to the Medium-Long Term Trend of the AUD

The ten-year change in the AUD is not determined by a single factor. To truly grasp its bullish or bearish turns, one must monitor three key variables simultaneously:

First, the monetary policy stance of the Reserve Bank of Australia (RBA)

The AUD has long been viewed as a high-yield currency, with its attractiveness largely dependent on interest rate differentials. Currently, the RBA’s cash rate is about 3.60%, with market expectations of another rate hike possibly in 2026. The Commonwealth Bank of Australia (CBA) forecasts a peak around 3.85%. If inflation remains sticky and the labor market stays resilient, a hawkish RBA stance could help restore the AUD’s interest rate advantage; if rate hikes fall short, the AUD’s support will weaken.

Second, China’s economic performance and commodity price cycles

Australia’s export structure is highly concentrated in iron ore, coal, and energy, making the AUD essentially driven by commodity demand. China’s demand is the most critical variable—when China’s infrastructure and manufacturing activity rebound, iron ore prices tend to rise, and the AUD quickly reflects this in the exchange rate. But if China’s recovery falters, even short-term commodity rebounds may lead to a “spike and retreat” pattern in the AUD.

Third, the USD trend and global risk sentiment

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-sensitive currencies, including the AUD. But if risk aversion rises and capital flows back into the dollar, the AUD can weaken even if its fundamentals are stable. Recent energy prices and global demand remain uncertain, with investors favoring safe-haven assets over the AUD.

In summary, for the AUD to enter a genuine medium-long-term bull phase, three conditions must align: hawkish RBA policy, a substantial improvement in Chinese demand, and a structural weakening of the dollar. If only one or two are present, the AUD is more likely to oscillate within a range rather than trend upward.

Outlook for the AUD in 2026: Can the Rebound Turn into a Trend?

Market opinions diverge on the next phase of the AUD after ten years. Most analysts agree that the AUD has room for a short-term recovery but that a true bullish trend requires clearer macroeconomic conditions.

Morgan Stanley offers a relatively optimistic forecast, expecting the AUD/USD to rise to around 0.72. This view is based on the RBA maintaining a hawkish stance and a strengthening of commodity prices. Similarly, Traders Union’s statistical model projects an average around 0.6875 by the end of 2026 (range 0.6738–0.7012), reflecting expectations of a strong Australian labor market and a rebound in commodity demand.

In contrast, UBS adopts a more cautious stance, noting that despite resilient domestic economic fundamentals, global trade uncertainties and potential Fed policy shifts could limit upside. They forecast the exchange rate around 0.68. The economists at the Commonwealth Bank of Australia are even more cautious, suggesting the AUD’s recovery may be short-lived, expecting it to peak in the first half of 2026 and decline again in the second half. Some Wall Street analysts warn that if the US avoids recession but the dollar remains super-strong, the AUD will struggle to break above 0.67.

Overall, projections for 2026 place the AUD in a range of approximately 0.68–0.70. Given Australia’s relatively stable fundamentals and the RBA’s hawkish stance, a sharp collapse seems unlikely; however, structural dollar strength still poses short-term resistance, making a sustained rally challenging. Short-term pressures mainly stem from fluctuations in Chinese data, while long-term upside depends on the pace of resource exports and commodity cycle recovery.

Practical Investment Strategies for the AUD: Forex Trading Tips

As one of the top five most traded currency pairs globally, AUD/USD benefits from high liquidity and predictable volatility, making technical and fundamental analysis more accessible. Investors can participate via forex margin trading, utilizing long and short positions, and leverage ratios from 1 to 200 times, seeking profit in both bull and bear markets.

This trading approach offers low entry barriers and high flexibility, suitable for small and medium investors. However, it is crucial to remember that forex trading is high risk—investors may lose all their capital—so risk management and capital control are essential.

Summary of the AUD’s Decade: Lessons and Outlook

The ten-year evolution of the AUD fundamentally reflects the cycles of global commodities and the strengthening of the US dollar. As a typical “commodity currency,” its exchange rate is highly correlated with prices of copper, iron ore, coal, and other raw materials, with Chinese demand being the most direct external driver.

In the short term, hawkish RBA policies and rising commodity prices will provide support; but in the medium to long term, global economic uncertainties and a rebound in the dollar pose risks that could limit upside and induce volatility. While short-term market fluctuations are rapid and difficult to predict, the AUD’s high liquidity and economic structure make its medium-long-term trend relatively easier to anticipate.

The decade-long history tells us that predicting the next ten years for the AUD hinges on monitoring the interaction of commodity cycles, interest rate differentials, and global risk sentiment. Only when all three align favorably for the AUD can a genuine reversal from its long-term weakness occur.