The story behind the AUD 10-year chart: Why is this commodity currency still struggling?

The ten-year chart of AUD/USD tells the story of a “Strong Dollar Era.”

From the 2013 high of 1.05 to today, the Australian dollar has depreciated by over 35%. During the same period, the US Dollar Index (DXY) rose by 28.35%, while the euro, yen, and Canadian dollar also experienced similar depreciation trends. This is not an isolated dilemma for the AUD but reflects the ongoing “Strong Dollar Cycle” in the global foreign exchange market.

Even in the second half of 2025, driven by sharp rises in iron ore and gold prices, as well as Federal Reserve rate cuts, the AUD/USD only appreciated by 5-7%. It just broke through 0.6636 before starting to fall back—this is a true reflection of the AUD’s movement.

Why is it so difficult for the AUD to stay at high levels?

Commodity attributes cooling down, while the dollar grows stronger.

The AUD is essentially a “commodity currency,” with its exchange rate closely linked to the prices of iron ore, coal, energy, and other bulk commodities. The past decade has shown us that the strength of the AUD mainly depends on three historical contexts:

2009-2011: China’s robust recovery led to a surge in commodity demand, with the Reserve Bank of Australia (RBA) maintaining significantly higher interest rates than the US, pushing the AUD close to 1.05.

2020-2022: A global commodities bull market and record-high iron ore prices saw the AUD briefly break 0.80. But this peak was short-lived.

2023-2024: Weak recovery in China, commodity prices oscillating at high levels, and narrowing interest rate differentials between Australia and the US caused the AUD to weaken again.

Currently, even as commodity prices rebound and the dollar adjusts, the AUD remains weak. Every time it approaches previous highs, selling pressure emerges immediately, indicating serious market confidence issues.

Analysis suggests the core problems are threefold:

First: US tariff policies are hurting global trade. Declines in Australia’s metal and energy exports weaken the AUD’s status as a commodity currency.

Second: The interest rate advantage between Australia and the US is disappearing. The RBA’s cash rate is about 3.60%, with market expectations of rising to 3.85% by 2026, but this is still far below US rates, greatly reducing the interest differential appeal.

Third: Australia’s domestic economy is not strong enough. In an environment of weak global risk sentiment, investors prefer safe-haven assets over risk-sensitive currencies like the AUD, suppressing its rebound potential.

To understand the AUD’s movement, three variables must be tracked

The long-term trend of the AUD is never determined by a single factor. Investors seeking to grasp turning points need to closely monitor:

Step 1: RBA’s policy shifts

The AUD has long been viewed as a high-yield currency, with its attractiveness fundamentally depending on the interest rate differential. If the RBA maintains a hawkish stance, inflation remains sticky, and the employment market stays resilient, the AUD can rebuild its interest advantage. Conversely, if rate hike expectations falter, the AUD’s support will weaken significantly.

Step 2: The linkage between China’s economy and commodity prices

Australia’s exports are highly concentrated in iron ore, coal, and energy. When China’s infrastructure and manufacturing activities rebound, these commodity prices tend to strengthen simultaneously, causing the AUD to respond quickly. But if China’s recovery falters, short-term rebounds in commodities are often fleeting, and the AUD will “rise then fall.”

Step 3: The US dollar cycle and global risk sentiment

The Fed’s policy pace remains the core driver of the global FX market. In a rate-cut environment, the dollar weakens, benefiting risk assets like the AUD; but if risk aversion rises and capital flows back into the dollar, the AUD, even with stable fundamentals, can be suppressed.

The core logic is: For the AUD to initiate a genuine medium- to long-term bull trend, three conditions must be met simultaneously—RBA returning to hawkishness, a substantial improvement in Chinese demand, and structural weakening of the dollar. Missing any one of these will cause the AUD to oscillate within a range rather than trend upward unilaterally.

Divergent forecasts from major institutions on AUD’s future

Market analysts’ views on the AUD’s outlook are increasingly polarized.

Optimists: Morgan Stanley projects the AUD/USD could rise to 0.72 by the end of 2025. This view is based on continued hawkishness from the RBA and rising commodity prices. Traders Union’s statistical model indicates an average of about 0.6875( in 2026 (range 0.6738-0.7012)), rising further to 0.725 by 2027, citing Australia’s strong labor market and commodity demand recovery.

Conservatives: UBS believes that despite Australia’s economic resilience, global trade uncertainties and potential Fed policy shifts will limit the AUD’s gains, maintaining it around 0.68 by year-end. Economists at the Commonwealth Bank of Australia are more cautious, predicting the AUD may hit a high in March 2026 but will retreat by year-end.

Market consensus: In the short term, the AUD is likely to fluctuate within 0.68-0.70. Medium term, if the US economy achieves a soft landing and the dollar index declines, commodity currencies like the AUD could rebound; but if the dollar remains dominant due to interest rate differentials, the AUD will struggle to break through 0.67.

Long-term, the AUD is unlikely to crash sharply—Australia’s fundamentals are stable, and the RBA remains relatively hawkish; but it also won’t return to 1.0—since the dollar’s structural advantage persists. The real risks stem from fluctuations in Chinese data, while positive catalysts include resource exports and a renewed commodity cycle.

Lessons from the AUD chart: How should investors respond?

As one of the top five most traded currency pairs globally, with high liquidity and low spreads, the AUD’s characteristics make its analysis relatively straightforward.

But understanding does not equal accurate prediction. The AUD’s movement is influenced by multiple factors; short-term models have limited effectiveness, while long-term trends are more controllable. Investors’ strategies should be:

In the short term: Focus on RBA rate decisions, Chinese economic data releases, and US employment and inflation reports. These events often trigger significant volatility in the AUD.

In the medium term: Track the prices of commodities like iron ore and gold, as well as the trend of the US dollar index. Commodity price strength often signals an upcoming rebound for the AUD.

In the long term: Observe Australia’s resource export growth, RBA’s interest rate policy trajectory, and global economic growth expectations. These factors determine whether the AUD has a sustainable upward foundation.

While the AUD has some rebound potential, it lacks a clear upward trend. Without growth momentum and interest rate advantages, the AUD behaves more like a “range-bound currency,” easily influenced by external factors rather than its own fundamentals—this is the real reason behind market caution toward the AUD.