US dollars per Australian dollar

IBISWorld forecasts the AUD/USD exchange rate to grow by 5.6% in 2025-26 to US$0.6834. This figure represents the expected average price over the course of the year but is likely to underestimate the end-of-year figure, with major banks tipping the exchange rate to exceed US$0.7100 in June 2026. The exchange rate performed strongly throughout the September 2025 quarter, appreciating relative to the previous quarter, as weaker signals in US economic data made the Australian dollar more attractive to FX traders. Growth flatlined across the December quarter, before a 4.6% spike in the monthly average exchange rate in January 2026, as inflation data in the Australian economy hinted at a potential cash rate hike in the RBA's February meeting. The 25 basis-point increase in February 2026, which was followed by a further 25 basis-point increase in March 2025, has pushed up demand for the Australian Dollar as returns on cash investments in Australian markets have become far more competitive with US investment options.

After trading above US$1.00 in 2011-12 and 2012-13, the Australian dollar has depreciated over the last decade and has traded below 70 US cents for a significant percentage of the past five-year period. 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. 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 cut the cash rate further to a record low of 0.10% in November 2020, but the Australian dollar remained resilient following the decision, as low overseas interest rates limited its impact on the currency's value.

Post-pandemic inflation caused both the US Federal Reserve and the RBA to start raising interest rates in 2021-22. The RBA began steadily increasing the cash rate in May 2022, sparking 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 AUD/USD 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 across 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, before being cut to 3.75% in three of the four months through December 2025. 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 AUD/USD exchange rate continued to slide in 2024-25. This trend was exacerbated by trader fears about the potential ramifications of US tariffs 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, as Australia's adoption of contractionary monetary policy has resulted in the RBA's cash target exceeding the US Federal Funds rate by 35 basis points (as of the March 2026 RBA meeting). Overall, IBISWorld forecasts the AUD/USD exchange rate to decline at an average annual rate of 1.8% over the five years through 2025-26.