Will the Australian dollar keep rising? The expectations of the central bank's rate hikes and the commodity bull market provide the answer.

The Australian dollar has recently surged quite aggressively. Since the beginning of 2025, the AUD/USD has increased by 8.4%, and on December 29, it broke through 0.6727, hitting a 14-month high. As of December 30, the AUD/USD quote stands at 0.6706.

**Two Major Factors Supporting the AUD's Rally**

Why is the AUD appreciating so quickly? It seems simple, but behind it are two invisible hands driving the movement.

The first is the divergence in central bank policies. There are signs of inflation rebound in Australia, and the December meeting minutes revealed a hawkish tone, leading the market to expect the Reserve Bank of Australia (RBA) to raise interest rates in 2026. In contrast, the U.S. Federal Reserve is expected to continue its rate-cut cycle, with two more cuts projected in 2026. Imagine, one side preparing to hike rates while the other continues to cut; this widens the interest rate differential. The larger the spread, the easier capital seeking yields flows into Australian assets, naturally pushing the AUD higher.

The second is the arrival of a super cycle in commodities. Gold, silver, copper, and other major commodities have recently hit record highs. As a major resource exporter, Australia benefits immensely from this commodity bull market—it's like a pie falling from the sky. Higher commodity prices mean increased export income for Australia, improving economic prospects and attracting more foreign investment interest in Australian assets.

**Will the AUD Rise Further in 2026? What Do Institutions Say?**

Since the rally has already begun, will it continue to rise?

Deutsche Bank is more optimistic, expecting the interest rate differential advantage of the AUD within the G10 currency basket to further expand. Specifically, they forecast AUD/USD could reach 0.69 in Q2 2026 and possibly hit 0.71 by the end of the year.

The National Australia Bank (NAB) has a more aggressive outlook. They expect the RBA to raise rates twice in 2026. Based on this, they project AUD/USD could rise to 0.71 in Q2 2026 and even reach 0.72 in Q3.

**Two Key Dates to Watch in the Short Term**

However, whether the AUD's rally can continue depends on two major upcoming events:

On January 28, Australia will release Q4 CPI data. Inflation figures directly influence market expectations regarding the timing of the RBA's rate hikes.

On February 3, the RBA will announce its latest interest rate decision. The central bank's stance will further solidify or alter market expectations for the AUD's outlook.

The data and statements from these two dates will essentially determine whether the AUD's strength can be sustained. Investors should mark these dates on their calendars.