The Australian dollar's rally against the US dollar is fierce! It has already increased by 8.4% in 2025. Can it achieve even better results in 2026?

The strong performance of the AUD/USD has attracted market attention. At the end of December, the Australian dollar exchange rate surged to 0.6727, reaching a new high in nearly 14 months. Since the beginning of 2025, the AUD has appreciated by a total of 8.4% against the US dollar, showing a considerable upward momentum.

The Driving Forces Behind the AUD Appreciation: Policy Divergence and Commodity Bull Market

The current upward trend of the AUD is primarily driven by two key factors.

First is the divergence in monetary policy expectations between Australia and the United States. Due to signs of a rebound in Australian inflation data and the hawkish signals released in the recent minutes of the Reserve Bank of Australia (RBA) meeting, the market generally anticipates that the RBA will raise interest rates in 2026. In contrast, the Federal Reserve is still in a rate-cutting cycle, with market expectations of two rate cuts in 2026. This divergence in policy outlook provides strong support for the AUD.

Second is the rally in commodities. Major commodities such as gold, silver, and copper have recently hit record highs, benefiting resource-exporting countries like Australia. The rising commodity prices have directly improved Australia’s export prospects, further boosting investor confidence in the AUD.

Institutional Forecasts: The Possibility of Continued AUD Strength into 2026

Professional institutions are optimistic about the AUD’s outlook. Deutsche Bank believes that the interest rate differential advantage of the AUD within the G10 currency basket will continue to widen. The bank forecasts that the AUD/USD could rise to 0.69 by Q2 2026 and further to 0.71 by the end of the year.

The National Australia Bank (NAB) has a more aggressive forecast. It predicts that the RBA will raise interest rates twice in 2026. Under this expectation, the AUD/USD could reach 0.71 in Q2 2026 and climb to 0.72 in Q3.

Key Dates: Two Major Events Will Determine if the AUD’s Strength Can Continue

Short-term factors influencing the AUD’s future trend have already emerged. On January 28, Australia will release Q4 CPI data; on February 3, the RBA will announce its latest interest rate decision. These significant releases will directly impact market expectations regarding the RBA’s rate hikes and thus determine whether the AUD can maintain its current strength. Investors should closely monitor the data and statements from these two key dates.