The Australian dollar exchange rate has reached a 14-month high! An increase of over 8% in 2025, will it continue to rise in 2026?

Investment Insights - The expectations of the Reserve Bank of Australia to raise interest rates and the commodity bull market have jointly contributed to the rise of AUD/USD. On December 29, AUD/USD rose to 0.6727, reaching a new high since October 2024. As of December 30, the report was 0.6706. Since the beginning of 2025, the Australian dollar has appreciated by 8.4% against the US dollar. [Source: TradingView; AUD/USD trend in 2025] What are the reasons for this round of Australian dollar appreciation? The rise in AUD/USD is mainly due to the divergence in monetary policy between the Reserve Bank of Australia and the Federal Reserve. Due to the rebound in inflation in Australia, coupled with the hawkish tone reflected in the December meeting minutes, the market generally bets that the Reserve Bank of Australia will raise interest rates in 2026. Meanwhile, the Federal Reserve's rate-cutting cycle is expected to continue, with the market generally anticipating two rate cuts in 2026. This divergence in monetary policy supports the rise of AUD/USD. In addition, recent historical highs in gold, silver, and copper prices benefit the Australian economy as a resource-exporting country, further boosting the Australian dollar. What is the future trend of the Australian dollar exchange rate? Deutsche Bank points out that the interest rate differential advantage of the Australian dollar among G10 currencies will further increase. It predicts that AUD/USD will reach 0.69 in the second quarter of 2026 and 0.71 by the end of the year. National Australia Bank expects the Reserve Bank of Australia to raise interest rates twice in 2026. Against this backdrop, AUD/USD is expected to rise to 0.71 in the second quarter of 2026 and to 0.72 in the third quarter. Analysts indicate that in the short to medium term, investors need to pay attention to two major events: the release of Australia's fourth-quarter CPI data on January 28 and the Reserve Bank of Australia's latest interest rate decision on February 3. These two events will influence the market's judgment on the Reserve Bank of Australia's interest rate hikes, thereby determining whether the strength of the Australian dollar can continue