The Australian dollar exchange rate continues to rise! Institutions predict further appreciation in 2026, depending on these two events

AUD/USD’s upward momentum is strengthening. As of December 30, the AUD/USD quote stands at 0.6706, reaching a 14-month high of 0.6727 on December 29. Since the beginning of the year, the Australian dollar has appreciated by a total of 8.4%, showcasing an impressive gain.

Divergence in Central Bank Policies as a Driving Force

The recent rise in the Australian dollar is primarily driven by the divergence in policy directions between the Reserve Bank of Australia (RBA) and the Federal Reserve (Fed). On the Australian side, due to renewed inflation pressures, the December meeting minutes revealed a clear hawkish stance, with markets widely expecting the RBA to implement rate hikes in 2026. In contrast, the Fed remains in a rate-cutting cycle, with general expectations of two rate cuts in 2026. The divergence in policy approaches between the two countries directly supports the strengthening of the AUD.

Commodity Bull Market Adds Fuel

Another significant factor is the booming commodities market. Major commodities such as gold, silver, and copper continue to hit record highs. As a traditional resource-exporting country, Australia’s economy is highly sensitive to commodity price movements. The strong performance of commodities benefits the outlook for the Australian economy and further boosts the AUD exchange rate.

Institutional Forecasts for Continued Appreciation in 2026

Looking ahead, Wall Street analysts generally expect the AUD to continue rising. Deutsche Bank believes that the interest rate differential within the G10 currency group will further enhance the attractiveness of the AUD, predicting that the AUD/USD will rise to 0.69 by Q2 2026 and could reach 0.71 by the end of the year. The National Australia Bank (NAB) has a more optimistic forecast, expecting the RBA to implement two rate hikes in 2026. Based on this, the AUD/USD is projected to rise to 0.71 in Q2 and to 0.72 in Q3.

Key Short-Term Dates to Watch

However, the future performance of the AUD/USD will depend on two important upcoming data releases. On January 28, Australia will release its Q4 CPI data, and on February 3, the RBA will announce its latest interest rate decision. The content of these reports will directly influence market expectations regarding whether and when the RBA will raise rates, which in turn will determine whether the strength of the AUD can be sustained.