AUD 20-Year Exchange Rate Trend Chart Reveals: When Will the Weakness Cycle End?

The Australian dollar is the fifth most traded reserve currency globally (ranked after the US dollar, euro, Japanese yen, and British pound), and the AUD/USD currency pair also ranks among the top five in global trading activity. This characteristic gives the AUD advantages such as high liquidity and low spreads, attracting both short-term traders and long-term investors.

However, if you observe the 20-year exchange rate chart of the Australian dollar, you will notice a remarkable phenomenon: the AUD has shown a long-term depreciation trend, and even occasional rebounds have struggled to break through previous highs. What economic logic underlies this?

Why has the AUD continued to weaken over the past 20 years?

From the 20-year exchange rate chart, it is clear that the AUD’s periods of strength mainly occurred during 2009-2011 and 2020-2022. The rest of the time, it mostly traded sideways or depreciated.

In early 2013, the AUD/USD exchange rate briefly rose above 1.05, but over the following decade (2013-2023), it fell by more than 35%, while the US dollar index (DXY) increased by 28.35%. This reflects that the AUD’s weakness is not an isolated phenomenon but part of a broader global “strong dollar cycle.” Major currencies like the euro, yen, and Canadian dollar also performed poorly against the dollar, indicating the structural advantage of the US dollar is difficult to shake.

Although the AUD attracted speculative capital inflows due to its high interest rates, the interest rate advantage has gradually diminished. Additionally, China’s economic slowdown has weakened demand for raw materials like iron ore and coal, significantly reducing the support for the commodity currency. US tariff policies have also impacted global trade patterns, hindering raw material exports and exacerbating the situation.

Three key drivers behind the 20-year AUD exchange rate trend

The AUD’s movement is influenced by multiple factors. To determine whether the AUD has medium- to long-term upward potential, three decisive variables must be considered:

1. The Reserve Bank of Australia’s (RBA) monetary policy

As a high-yield currency, the AUD’s attractiveness is entirely tied to its interest rate differential. Currently, the RBA’s cash rate is about 3.60%, with market expectations of another rate hike by 2026. If the Commonwealth Bank of Australia (CBA) forecasts a peak rate of 3.85% and inflation remains sticky with a resilient labor market, the RBA’s hawkish stance will help the AUD rebuild its interest rate advantage over the dollar. Conversely, if rate hike expectations fall short, the AUD will lose an important support.

2. China’s economy and commodity prices

Australia’s export structure is highly concentrated in iron ore, coal, and energy, which means the AUD is essentially a commodity currency. China’s infrastructure and manufacturing activity directly determine the AUD’s direction. When China’s recovery is strong, iron ore prices tend to rise in tandem, and the AUD exchange rate quickly reflects this change; but if Chinese demand weakens, even a short-term rebound in commodities can lead to a “quick spike and rapid fall” in the AUD.

3. The US dollar cycle and global risk sentiment

From a capital allocation perspective, the Federal Reserve’s policy stance remains the dominant force in the global FX market. In a rate-cut environment, the US dollar usually weakens, benefiting risk currencies including the AUD. However, if risk aversion increases and capital flows back into safe US assets, the AUD can come under pressure even if its fundamentals are not deteriorating. Recent signals of softening energy prices and global demand remain cautious, with markets favoring safe-haven assets over cyclical currencies.

For the AUD to achieve a medium- to long-term bullish trend, three conditions must be met simultaneously: hawkish RBA policy, a substantial improvement in Chinese demand, and a structural weakening of the US dollar. If only one of these is present, the AUD is more likely to remain range-bound rather than trend upward unilaterally.

Future outlook for the 20-year AUD exchange rate chart

Looking beyond 2026, market forecasts for the AUD diverge significantly.

Optimistic forecasts, such as Morgan Stanley, project the AUD could reach 0.72 by the end of 2025, based on the expectation that the RBA will maintain a hawkish stance and commodity prices will support the currency. The Traders Union statistical model indicates 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. These forecasts share the assumption that the US economy will experience a soft landing and the US dollar index will decline, benefiting commodity currencies like the AUD.

Pessimistic views, represented by UBS and CBA economists, suggest that despite Australia’s resilient economy, global trade uncertainties and potential Federal Reserve policy shifts will limit the AUD’s gains, projecting a value around 0.68 by year-end. CBA economists are more cautious, expecting only a short-term rebound, with a peak around March 2026, followed by a possible decline by year’s end.

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

Overall, the 20-year AUD exchange rate chart exhibits clear cyclical features. In the first half of 2026, the AUD is likely to trade within the 0.68-0.70 range, influenced by Chinese data releases and US non-farm payroll reports. It is unlikely to fall sharply (given Australia’s solid fundamentals and the relatively hawkish RBA), but also unlikely to surge to 0.75 (as the structural strength of the dollar persists).

Short-term pressures stem from China’s economic data, while medium- to long-term positives include Australia’s resource export advantages and the global commodities cycle recovery.

Summary of key points for AUD investment

As a commodity-exporting country, the AUD’s “commodity currency” attribute is prominent, closely linked to prices of iron ore, refined copper, coal, and other raw materials. The 20-year exchange rate chart clearly shows that its movements are not independent but deeply tied to global macro cycles.

In the short term, hawkish RBA policies and strong raw material prices will provide support; but in the medium to long term, investors should watch for global economic uncertainties and potential rebounds in the US dollar, which could limit AUD gains and increase volatility.

Although FX markets are volatile and predicting exchange rates is challenging, the AUD’s high liquidity, cyclical patterns, and distinct economic structure make medium- to long-term trend analysis relatively feasible. For investors interested in trading the AUD, understanding the RBA’s policy stance, Chinese economic data releases, and the US dollar cycle will be crucial for developing effective trading strategies.