Will the Australian dollar still rise in 2025? Predicting future opportunities and risks based on exchange rate trends

Key Analysis of the Future Trend of AUD: Three Major Factors Determine the Rebound Space

As the fifth-largest traded currency globally, AUD/USD remains one of the most liquid currency pairs worldwide. However, this high-yielding currency, once favored, has faced persistent weakness over the past decade. Starting from the 1.05 level in early 2013, the Australian dollar has depreciated over 35%, while the US dollar index has risen by 28.35%. What underlying factors are at play? Is there a chance for the AUD to turn around in the future?

The identity of AUD as a “commodity currency” shapes its trajectory. Since Australia’s economy heavily depends on exports of iron ore, coal, copper, and other commodities, any fluctuation in global raw material prices directly impacts the AUD exchange rate. This sensitivity can lead to impressive gains during favorable markets (e.g., AUD/USD surged 38% in 2020), but also makes it more vulnerable to downturns.

By 2025, the fate of the AUD becomes even more complex. Early in the year, due to escalating trade tensions, AUD/USD fell to 0.5933, hitting a five-year low. However, after the panic caused by Trump’s “reciprocal tariffs” policy eased in April, the AUD gradually appreciated. Especially in September, amid soaring iron ore and gold prices and expectations of Fed rate cuts, AUD/USD briefly rose to 0.6636, surpassing the high since November 2024.

Three Core Factors Influencing AUD Exchange Rate Forecast

To determine whether the AUD can truly “recover,” close attention must be paid to changes in the following three dimensions:

Reserve Bank of Australia (RBA) Policy and Domestic Economic Performance

In Q3 2025, Australia’s Consumer Price Index (CPI) rose 1.3% month-on-month, exceeding the previous quarter’s 0.7% and surpassing market expectations. The RBA signaled caution, emphasizing that core inflation pressures in housing and services sectors are surprisingly difficult to cool down. It explicitly stated that further easing would only be considered after inflation enters a sustainable downward trajectory.

What does this imply? In the short term, a cooling of easing expectations could support the AUD. When the RBA adopts a more cautious stance, the AUD becomes more attractive relative to currencies eager to cut rates (like the USD). However, the strength and durability of this support still depend on future economic data.

US Dollar Trends: The Divide Between Strength and Weakness

In October, the Fed announced a second 25 basis point rate cut this year, but Chair Powell’s subsequent comments dampened market expectations for continued rate cuts. Despite ongoing discussions about USD depreciation and de-dollarization trends, the USD index (DXY) has shown resilience, rebounding about 3% from its summer low near 96. Many analysts believe the probability of the USD breaking above the key psychological level of 100 is increasing.

The general rule is: a stronger USD tends to weaken the AUD—these two usually move inversely. Therefore, Fed policy direction and the USD’s strength or weakness directly influence the AUD’s upside potential.

China’s Economic Recovery — The “Lifeline” for AUD

This might be the most underestimated factor. Australia’s economy is highly resource-dependent, with China being its largest buyer. China’s demand for iron ore, coal, natural gas, and other raw materials almost directly determines the long-term trend of the AUD.

When China’s economy shows signs of robust recovery, resource exports and prices tend to rise, boosting market confidence in AUD assets. Conversely, if China’s recovery slows, especially with ongoing weakness in the property market, concerns about raw material demand will surface, causing the AUD to lose vital support and weaken. This is the most critical long-term variable in AUD exchange rate forecasts.

Divergence Among Institutions: How High Can AUD Rise?

Regarding the future of the AUD, major global financial institutions hold differing views. Morgan Stanley is relatively optimistic, expecting AUD/USD to reach 0.72 by the end of 2025, supported by the RBA’s potential hawkish stance and rising commodity prices.

UBS is more cautious. While acknowledging Australia’s economic resilience, it worries about global trade uncertainties and potential Fed policy shifts, predicting the AUD will stay around 0.68 by year-end.

The most conservative outlook comes from CBA Economists, who believe the current rebound in the AUD may be short-lived. They forecast a short-term peak around March 2026, with a possible decline again by year-end, reasoning that although the USD may weaken in 2025, the US economy’s faster growth could lead to a USD rebound.

Comparative Forecasts for Different Currency Pairs

AUD/USD: Core Trading Pair

In the short term, AUD/USD is expected to fluctuate between 0.63 and 0.66. If inflation data remains positive and the economy stays stable, it may test resistance above 0.66. However, if global risk sentiment worsens or the USD rebounds, the pair could fall back toward 0.63 or lower. The key medium-term level is the 200-day moving average at 0.6464; a confirmed break above could open up a rebound space toward 0.6550-0.6600.

AUD/CNY: A Barometer of Trade Relations

The stability of China-Australia trade significantly influences this pair. Given the relatively stable overall trend of the RMB, AUD/CNY is likely to oscillate between 4.6 and 4.75 over the next 1-3 months. If the RMB weakens due to domestic economic pressures, AUD/CNY could temporarily rise toward 4.8. Long-term, this pair closely follows AUD/USD but with slightly smaller declines (due to lower RMB volatility).

AUD/MYR: A Mirror of Regional Economy

Malaysia’s economy also relies on exports and raw materials, making MYR sensitive to commodity prices. Amid global economic uncertainties, AUD/MYR may fluctuate between 3.0 and 3.15. If Australian economic data weaken further, it could test support near 3.0. Conversely, if global demand remains stable, the MYR could strengthen relatively.

Trading Strategies for Different Cycles

Short-term (1-3 days): Range Trading

When AUD/USD oscillates between 0.6370 and 0.6450, traders can adopt a buy-low, sell-high approach. A breakout above 0.6450 could be a signal to go long with targets at 0.6464 and the psychological level 0.6500. A break below 0.6373 might suggest shorting toward 0.6336 or 0.6300. Caution is advised before data releases, as market volatility may increase ahead of US GDP, core PCE, and Australian CPI announcements.

Medium-term (1-3 weeks): Trend Following

Bullish scenario: As Fed rate cut expectations rise due to weak employment, falling inflation, and easing trade tensions, AUD could rebound to 0.6550-0.6600 amid risk appetite. Bearish scenario: If US economic resilience exceeds expectations, the Fed delays rate cuts, or trade tensions escalate, AUD may test the year’s lows.

Long-term Holding: Gradual Position Building

Investors optimistic about AUD long-term can accumulate positions gradually at current lows, smoothing out market fluctuations over time. This strategy is especially effective after confirming an uptrend.

Summary: Core Points of AUD Exchange Rate Forecast

AUD/USD is currently at a crossroads of technical oscillation and fundamental debate. Short-term trading should focus on the 0.6370-0.6450 range, with breakout follow-up. The medium- to long-term direction depends on signals from Fed policy shifts and whether global trade risks truly ease.

Investors should closely monitor three key indicators: whether the RBA maintains a hawkish stance, whether the USD index can break above 100, and the actual progress of China’s economic recovery. If this week’s economic data reinforce rate cut expectations, it could be an opportunity to go long; otherwise, caution is needed against USD rebound pressures. Flexibly adjusting strategies and responding dynamically to market sentiment are crucial for survival in this volatile environment.