Why has the Australian dollar lost its value? From a commodity currency to a trading niche, this key driving force has been overlooked.

Did you know? The Australian dollar is the fifth most traded currency globally (after USD, EUR, JPY, GBP), and the “AUD/USD” currency pair ranks fifth in trading activity worldwide. Its liquidity and low spreads make it relatively efficient for both short-term trading and medium- to long-term positioning.

But why has the Australian dollar been weakening over the past decade?

Once a high-yield darling, why has it become “redundant”?

The AUD is a typical “commodity currency”—Australia’s economy heavily depends on exports of iron ore, coal, copper, and other bulk commodities. Fluctuations in global raw material prices often cause sharp swings in the AUD exchange rate. As a high-yield currency, it was once favored for carry trades.

But reality is harsh. Starting from early 2013 at around 1.05, over the past ten years (2013-2023), the AUD has depreciated by over 35%, while the US dollar index (DXY) has risen by 28.35%. The euro, yen, and Canadian dollar have also weakened against the dollar, indicating a strong dollar cycle globally.

From both technical and fundamental perspectives, the AUD faces unfavorable conditions. Even when it rebounds, it struggles to hold high levels—this is the fundamental reason for its persistent weakness.

In Q4 2024, the AUD/USD plummeted sharply, with an annual decline of about 9.2%. Entering 2025, amid rising global trade tensions and recession fears, the AUD briefly fell to 0.5933, hitting a five-year low.

Analysts cite core reasons:

• US tariff policies disrupt global trade, leading to declines in raw material exports (metals, energy), weakening the commodity currency nature of the AUD
• The interest rate differential between Australia and the US remains difficult to reverse
• Australia’s domestic economy is sluggish, asset attractiveness is relatively low, and capital outflows have intensified

Can the AUD rebound? Three key factors determine its future

After a panic-like drop in April 2025 due to “reciprocal tariffs,” the AUD/USD gradually appreciated. Especially in September, driven by soaring iron ore and gold prices and market expectations of Fed rate cuts, the AUD surged rapidly.

On September 10, the AUD/USD rose to 0.6636, surpassing the high since November 2024. In the past two months, although the AUD has slightly retreated, it has remained above 0.64.

Whether the AUD can “turn around” depends on these three key factors:

① RBA policy outlook

In Q3 2025, Australia’s CPI rose 1.3% month-over-month, well above the previous quarter’s 0.7% and market expectations. The RBA has repeatedly emphasized that core inflation pressures in housing construction and services are more stubborn to cool than anticipated.

Conclusion: The likelihood of the RBA cutting interest rates at the November meeting has significantly decreased, and market expectations for continued easing are cooling. Diminished easing expectations often support the AUD in the short term, making it more attractive than currencies expected to cut rates soon (like the USD).

② US dollar strength vs. weakness

On October 30, the Fed announced a 25 basis point cut to the federal funds rate to 3.75%-4.00%, marking the second rate cut this year. However, subsequent signals have dampened expectations of further cuts in December.

The reality: Since bottoming near 96 in the DXY this summer, the dollar index has shown unexpected resilience, rebounding about 3%, with a growing chance of breaking above 100 psychologically. The general rule is: When the dollar strengthens, the AUD tends to weaken, often moving inversely.

③ China’s economic recovery

Australia’s economy is highly resource-dependent, with China being its largest buyer. The health of the Chinese economy directly influences demand for key raw materials like iron ore, coal, and natural gas—core drivers of the AUD’s movement.

A strong Chinese recovery boosts resource exports and prices, strengthening market confidence in the AUD. Conversely, slowing growth, especially in the property sector, raises concerns about long-term raw material demand, weakening the AUD.

How do institutions view the AUD’s future?

Bullish view: Morgan Stanley expects the AUD to rise to 0.72 by the end of 2025, supported by the RBA’s potential hawkish stance and rising commodity prices.

Cautious view: UBS believes that despite resilience in Australia’s economy, global trade uncertainties and potential Fed policy shifts could limit gains, projecting a year-end rate around 0.68.

Conservative view: CBA economists see the AUD’s recovery as temporary. They forecast a peak around March 2026, with a possible decline by year-end, as the US economy outperforms other major economies, strengthening the dollar again.

AUD vs. MYR: analysis and outlook

AUD/USD: 0.63-0.66 becomes the new normal

Current situation: RBA maintains interest rates at 3.6% in November and signals caution. The AUD hovers around 0.65.

Influencing factors:

• Policy divergence: RBA’s unexpected hold suggests cautious optimism on inflation, providing short-term support. But market expectations for future policy diverge, and Fed actions will continue to influence the dollar.
• Inflation and economic data: Australia’s inflation has eased near target levels, supporting potential easing. However, slowing GDP growth and high global uncertainty pressure the economy.
• Trade and geopolitics: US tariffs and geopolitical risks add uncertainty. As a commodity currency, the AUD’s movement closely tracks commodity prices, which, if rising, will lift the AUD.

Short-term forecast: Expect AUD/USD to fluctuate between 0.63 and 0.66. If inflation data is favorable and the economy remains stable, it may test resistance above 0.66; if global risk appetite wanes or the dollar rebounds, it could fall back toward 0.63 or lower.

AUD/CNY: steady in 4.6-4.75 range

Key factors:

• China-Australia trade relations: Stable trade policies support the AUD/CNY. The RMB’s movement is influenced by Chinese monetary policy and US-China relations.
• RMB trends: Despite weak Chinese economic data, progress in US-China trade negotiations (e.g., tariff reductions) may ease RMB depreciation pressures.
• Australian economy: AUD/CNY closely follows AUD/USD, but due to lower RMB volatility, the range may be narrower.

Short-term forecast: With RMB relatively stable, expect AUD/CNY to oscillate between 4.6 and 4.75. If China’s economy weakens further or external factors worsen, it may rise toward 4.8 briefly.

AUD/MYR: regional economic differences emerge

Influencing factors:

• Regional disparities: Malaysia relies on exports and raw materials; MYR is sensitive to commodity prices. Weak Australian economic signals may limit AUD rebound.
• Policy comparison: Malaysia’s monetary policy remains relatively stable; if interest rate differentials widen, MYR could strengthen. RBA’s rate cuts slowing may reduce AUD’s depreciation pressure.

Short-term forecast: Amid global uncertainties, AUD/MYR may fluctuate between 3.0 and 3.15. If Australian economic data shows further weakness, the pair could test support near 3.0.

How to trade AUD? Short-, medium-, and long-term strategies

Short-term (1-3 days): Range trading with trend-following on breakouts

Long entry conditions:

• Price breaks above 0.6450 resistance and holds above it
• Targets: 200-day moving average at 0.6464, then psychological 0.6500
• Trigger factors: US GDP or non-farm data weaker than expected (raising rate cut expectations), Australian CPI unexpectedly rising
• Stop-loss: below 0.6420

Short entry conditions:

• Price falls below 0.6373 support (10-day EMA), short position
• Targets: 0.6336 (recent low), possibly 0.6300
• Trigger factors: Strong US data (better-than-expected GDP), sharp slowdown in Australian CPI
• Stop-loss: above 0.6400

Advice: Stay cautious before data releases. Market volatility may increase ahead of US GDP, core PCE, and Australian CPI, so reduce positions or stay on the sidelines.

Medium-term (1-3 weeks): Trend following, monitor central bank signals

Bullish scenario:

• US rate cut expectations rise: weak US employment, falling inflation, easing trade tensions, risk appetite improves, targeting 0.6550-0.6600
• Break above 200-day MA (0.6464): confirms medium-term reversal, consider adding positions

Risk warning: Rising Australian inflation forcing RBA hawkish, unexpected dollar weakness, geopolitical risks.

Bearish scenario:

• US economy resilient: strong GDP and non-farm data, delaying Fed rate cuts, dollar rebounds, AUD drops toward 0.6250 (year’s low)
• Escalating trade tensions, weak Chinese data

Long-term strategy: phased accumulation, smoothing volatility

Investors optimistic about the AUD can build positions gradually at current lows, smoothing out market fluctuations, especially if a bullish trend is confirmed.

Leverage trading opportunities with AUD

The AUD’s volatility offers ample profit opportunities. Traders can engage in margin forex trading with 1-200x leverage, enabling profit from both rising and falling markets. Forex trading has a low entry barrier, suitable for small to medium investors.

Risk warning: All investments carry risks. Forex trading is high risk; investors may lose all funds.

Summary and recommendations

Currently, the AUD/USD is in a technical consolidation phase amid fundamental battles. Short-term, focus on range trading (0.6370-0.6450), with trend-following on breakouts. The medium- to long-term direction depends on signals of Fed policy shifts and whether global trade risks ease.

Key points to watch:

1. Short-term volatility will intensify; monitor CPI, economic data, and global trade/commodity prices
2. Future RBA meetings are critical. If global risks decline and inflation softens, the AUD could gradually strengthen
3. AUD’s performance against regional currencies like MYR depends on respective monetary policies and economic fundamentals

Traders should closely follow market sentiment around data releases, adjust strategies flexibly, and incorporate diverse market information to dynamically manage positions.