Is the Australian dollar hitting a historic low? Understand why the AUD has depreciated 35% against the USD over the past ten years in this article. Can it rebound in 2026?

The Australian dollar, as the fifth largest global trading currency (after USD, EUR, JPY, GBP), is also one of the top five most actively traded currency pairs worldwide, characterized by high liquidity and low spreads, making it particularly suitable for short-term and medium-to-long-term positioning. However, a recent phenomenon has raised eyebrows: the AUD has hit a historic low, and even the AUD/HKD pair has fallen to a record low.

What’s going on? Why is this once “high-yield currency favorite” becoming less attractive?

Ten Years of 35% Depreciation: Why Has the AUD Fallen to This Level?

Numbers speak volumes. From early 2013 at 1.05 to now, the AUD/USD has depreciated over 35% in ten years, while the US dollar index (DXY) has risen by 28.35%. The euro, yen, and Canadian dollar against the dollar have also depreciated, indicating what? The world has entered a strong dollar cycle.

But the AUD’s experience has been particularly harsh because it has fallen into three traps:

Trap 1: Commodity Currency Attribute Fails Australia’s export structure is limited—iron ore, coal, energy. During China’s strong economic years, demand for these raw materials surged, and the AUD rose accordingly. During the pandemic in 2020, Australia managed well, China’s appetite for commodities remained strong, and the AUD surged 38% in one year, approaching 1.05.

But then? China’s recovery momentum slowed, demand for raw materials cooled, and the AUD lost its “external engine.” In 2023-2024, China’s economy remains sluggish, and the AUD stays weak for the long term, sometimes rallying briefly before falling back.

Trap 2: Disappearance of Interest Rate Advantage The AUD was once the darling of carry trades. The Reserve Bank of Australia (RBA) maintained higher interest rates than the Federal Reserve, attracting continuous arbitrage capital. Now, the interest rate gap has narrowed—RBA’s cash rate is about 3.60%, and the Fed’s rates are also high, reducing the appeal of the interest rate differential. Without this advantage, the AUD feels like it has lost its “cash card.”

Trap 3: US Policy Suppression US tariffs and escalating global trade tensions have impacted Australia’s raw material exports. The US economy remains resilient, exerting ongoing upward pressure on the dollar. Meanwhile, Australia’s domestic growth is weak, and asset attractiveness is relatively low. These three pressures make it difficult for the AUD to rebound.

As a result: The AUD/HKD has also hit a record low, reflecting Australia’s relatively weak economic outlook.

Why Did the AUD Recently Rebound? But Don’t Celebrate Too Early

In the second half of 2025, the AUD did indeed bounce back. Iron ore and gold prices surged, the Fed began cutting rates, and capital flowed into risk assets, lifting the AUD. AUD/USD briefly rose to 0.6636, appreciating by 5-7% overall.

But the key point is: this is a rebound, not a reversal.

Every time the AUD approaches previous highs, selling pressure quickly pulls it back down. The market seems to be saying: “I don’t trust you, don’t expect too much.” Why? Because the three pillars supporting the AUD still have issues:

• US tariff policies still suppress raw material exports
• Australian economic growth lacks clear momentum
• Interest rate differentials haven’t recovered to attractive levels

So, the current state of the AUD is: “a rebound without a trend”—don’t expect it to jump back to 0.8 in one go.

Will the AUD Turn Around in 2026? Three Key Factors to Watch

For the AUD to break into a genuine bull market, three conditions must be met simultaneously. Missing any one of them means failure:

1. RBA needs to shift to a hawkish stance—rebuilding the interest rate advantage

The RBA is currently cautious, but market expectations suggest possible rate hikes in 2026. Commonwealth Bank of Australia (CBA) forecasts a peak rate possibly reaching 3.85%.

If inflation remains sticky, employment remains resilient, and the RBA adopts a hawkish stance, the AUD could regain its interest rate advantage. Conversely, if rate hikes fall short, the AUD’s support will weaken significantly. This is the first card.

2. China’s economy needs to truly recover—this is the AUD’s ticking time bomb

Improved demand from China → rising raw material prices → rapid appreciation of the AUD. The logic is straightforward.

The problem is: China’s recovery momentum is still uncertain. Even if short-term raw material prices rebound, the AUD may experience a “rise and fall” pattern. This is the most challenging aspect of the fundamentals.

3. The US dollar must enter a structural weakening phase—global capital reallocation

In a rate-cut environment, a weakening dollar generally benefits risk assets like the AUD. But if risk aversion rises and capital flows back into the dollar, the AUD can be pressured even if fundamentals remain unchanged.

Currently, energy prices and global demand are not optimistic, and investors tend to favor safe-haven assets (USD) over cyclical currencies (AUD).

How Do Major Institutions View the AUD in 2026?

Several major banks have diverse forecasts:

• Morgan Stanley: AUD could reach 0.72 by the end of 2025, supported mainly by hawkish RBA and commodity prices
• Traders Union Model: Around 0.6875 by end-2026 (range 0.6738-0.7012), rising to 0.725 in 2027
• UBS: More conservative, expecting around 0.68 by year-end, constrained by global trade uncertainties and Fed policy shifts
• CBA Economists: The most cautious, believing the AUD’s recovery will be short-lived, possibly peaking in March 2026 and falling back by year-end

From my perspective, the AUD is likely to fluctuate between 0.68-0.70 in the first half of 2026. It won’t crash (Australia’s fundamentals are solid, and the RBA remains relatively hawkish), nor will it surge to 0.8 (the US dollar’s structural strength persists). Short-term pressures come from China’s data volatility, while long-term positives stem from resource exports and commodity cycle recovery.

Will the AUD/HKD return to its historical high? That depends on how well these three conditions align.

The Three Major Indicators for AUD Trends—Investors Must Watch

To understand the turning points of the AUD’s bullish or bearish trend, keep an eye on these three indicators:

RBA Monetary Policy → Determines whether the interest differential remains attractive
China’s Economy and Commodity Prices → Determines Australia’s export outlook
US Dollar Trends and Global Risk Sentiment → Determines capital flows

Mastering the interaction among these factors will help you grasp whether the AUD has the potential for sustained appreciation.

Where Are the Trading Opportunities in AUD?

AUD/USD, with its high liquidity and predictable volatility, makes it relatively easier to identify medium- and long-term trends. While many short-term models have limited effectiveness, Australia’s economic structure makes medium- and long-term judgments more straightforward.

Investors can participate in AUD movements through forex margin trading, engaging in both long and short positions, using leverage from 1-200x. Find profit opportunities in bull markets and hedge in bear markets. The trading barrier is low, suitable for small and medium investors.

Risk warning: Forex trading is high-risk investment; investors may lose all capital. Always set stop-loss orders for each trade.

Summary of AUD Outlook

As a commodity currency, the AUD is highly correlated with iron ore, coal, and energy prices, a characteristic that is unlikely to change. In the short term, a hawkish RBA stance and strong raw material prices can provide support; in the medium to long term, global economic uncertainties and potential US dollar rebounds should be watched carefully.

The historic low of the AUD/HKD reflects Australia’s relatively weak economic outlook. But as long as China’s demand recovers, the Fed continues to cut rates, and the RBA maintains a hawkish stance, the AUD will have opportunities to rebound. The key question is: can this rebound turn into a trend? We’ll see in 2026.