US dollars per Australian dollar

IBISWorld forecasts the AU$/US$ exchange rate to grow by 3.8% in 2025-26 to US$0.6715. Throughout Q3 2025, the exchange rate performed strongly, appreciating compared to the previous quarter, as weaker signals in the US economy's figures resulted in the Australian dollar becoming more attractive to traders. Over the remainder of 2025-26, the Australian dollar is expected to perform strongly against the US dollar, as US tariffs and low commodity prices are set to weigh on the attractiveness of the US dollar. The US Federal Reserve is also expected to cut the Federal Funds Rate more aggressively than the Reserve Bank of Australia, further enhancing the outlook for the AU$/US$ exchange rate over the second half of the year.

The RBA cut the cash rate five times between June 2019 and March 2020, including an emergency meeting that led to two rate cuts in March 2020, primarily due to the pandemic's impact on the local economy. Demand initially moved towards safe-haven currencies, like the US dollar and Japanese Yen, causing the Australian dollar to fall to a low of US$0.5571 on the 19th March 2020. The demand for the Australian dollar was also weakened by the slowdown in the Chinese economy, which further encouraged investors to shift towards other currencies. In 2020-21, the Australian dollar strengthened due to Australia's success in containing COVID-19 and its faster-than-expected economic recovery. The RBA also cut the cash rate further to a record low of 0.10% in November 2020, but the Australian dollar remained resilient following the decision. Similarly, low interest rates overseas limited the effect on the value of the Australian dollar.

Post-pandemic inflation caused both the US Federal Reserve and the RBA to start raising interest rates in 2021-22. The RBA began increasing the cash rate steadily in May 2022, which sparked a run of 10 consecutive increases. A further cash rate rise occurred in November 2023, which pushed the rate to 4.35%. The US Federal Reserve was more aggressive with its rate hikes, lifting the federal funds rate by 75 basis points in July, September and November 2022, providing support for the US dollar in 2022-23. Throughout 2021-22 and 2022-23, investment flocked towards US assets, driven by attractive government bond yields. As a result, the average AU$/US$ exchange rate fell by almost 8 US cents compared to 2020-21.

Both central banks kept rates steady until September 2024, when the US Federal Reserve dropped the interest rate target range by 50 basis points. This was followed up with another 50-basis-point decrease in across two consecutive months in November and December 2024, justified by a cooling in the labour market and inflation decreasing towards the Federal Reserve's 2.0% target. The rate was held at 4.50% for the first eight months of 2025, until a decision was made in September 2025 to drop the rate by 25 basis points. On the other hand, Australia was comparatively slow to drop its cash rate, as inflation in the Australian economy remained above the RBA's 3.0% upper bound target. The RBA first cut the rate by 25 basis points in February 2025 and again by the same amount in May. By the end of the year, the Australian cash rate sat 65 basis points below the US Federal Funds rate, limiting the attractiveness of Australian bond investments. As a result, the AU$/US$ exchange rate continued to slide in 2024-25. This trend was exacerbated by trader fears surrounding the potential ramifications that US tariffs may have had on Australia, both directly through exports to the US and indirectly via potential shocks to Australia-China trade relations. However, the exchange rate has rebounded since initial tariff announcements, with the rebound tipped to continue into 2025-26. Overall, IBISWorld forecasts the AU$/US$ exchange rate to decline at an average rate of 2.2% per annum over the five years through 2025-26.