Can the Australian dollar still be invested after a decade of weakness? Comparison of fixed deposit and forex trading returns for the Australian dollar in 2026

The Australian dollar is one of the top five major currencies by global trading volume, and the AUD/USD pair is one of the most liquid currency pairs. But over the past decade, why has the AUD become increasingly weaker? Are there still investment opportunities in the future?

AUD Depreciated Over 35% in Ten Years: Why Is It in a Long-Term Dilemma?

From the early 2013 level of 1.05 to now, the AUD/USD has depreciated by over 35%. During the same period, the US dollar index rose by 28.35%, reflecting a comprehensive strong dollar cycle.

Specifically, the past ten years have seen several distinct phases:

2009-2011: Commodity Bull Market Supports the AUD

• China’s robust economic recovery drove demand for commodities
• Australian interest rates were significantly higher than in the US
• The AUD rose close to 1.05 highs

2020-2022: Short-term rebound followed by decline

• Australia’s pandemic response was relatively stable
• Strong demand for iron ore in Asia
• AUD briefly broke above 0.80, gaining about 38%
• But then entered a long-term consolidation pattern

2023-2024: China’s sluggish recovery worsens the AUD’s predicament

• China’s economic growth remains weak, commodity demand declines
• The interest rate differential between the RBA and the Fed narrows
• The AUD trend remains generally weak

2025 to Present: Rebound but no breakthrough

• Iron ore and gold prices rebound
• The Fed cuts interest rates, attracting risk assets
• AUD briefly rose to 0.6636
• Appreciated about 5-7% throughout the year, but the structural weakness persists

Why Does the AUD Still Tend to Fall After Rebounds?

Even when commodity prices rise and the dollar weakens, why is the AUD still difficult to sustain higher? There are three main reasons:

First, the interest rate advantage has disappeared

The RBA’s cash rate is about 3.60%. The AUD, once considered a “high-yield currency,” has lost its appeal. The narrowing gap with US rates weakens the carry trade support for the AUD.

Second, US tariff policies hit commodity exports

Australia’s export structure heavily depends on iron ore, coal, and energy. Uncertainty in US tariff policies increases global trade risks, weakening raw material exports expectations, directly undermining the AUD’s status as a commodity currency.

Third, market confidence is lacking

Whenever the AUD approaches previous highs, selling pressure increases significantly. This indicates a lack of confidence in the long-term appreciation of the AUD, often resulting in “rising then falling” movements. Domestic economic weakness and declining asset attractiveness also limit foreign capital inflows.

In simple terms, the AUD now resembles a “rebound but lacking a trend” currency. Without clear growth momentum and interest rate advantages, the AUD’s movements are more influenced by external factors than by its fundamentals.

Three Key Factors to Monitor for Medium-Long Term AUD Trends

If you want to assess whether the AUD is worth investing in, focus on these three factors:

Factor 1: RBA Monetary Policy

The RBA’s interest rate decisions directly impact the interest rate differential. Currently, the market expects another rate hike by 2026, with the RBA’s peak rate forecasted to reach around 3.85%.

Investment impact: If inflation remains sticky and the labor market stays resilient, a hawkish stance from the RBA could restore the AUD’s interest rate advantage; otherwise, if rate hikes fall short, the AUD’s support will weaken significantly.

Factor 2: China’s Economy and Commodity Prices

The AUD is essentially a commodity currency, highly correlated with iron ore, coal, and energy prices. China’s demand is the most critical variable.

Investment impact: When China’s infrastructure and manufacturing activity rebound, iron ore prices tend to rise quickly, and the AUD usually responds swiftly; if China’s recovery falters, even a short-term commodity rebound may be followed by a decline in the AUD.

Factor 3: US Dollar Trends and Global Risk Sentiment

The Federal Reserve’s policy cycle remains central to the global FX market. In a rate-cut environment, a weaker dollar generally benefits risk currencies like the AUD; but if risk aversion increases and capital flows back into the dollar, the AUD can weaken even if fundamentals are stable.

Investment impact: Recent energy prices and global demand remain uncertain, with investors favoring safe-haven assets, limiting the AUD’s upside potential.

Major Institutions’ AUD Forecasts for 2026

Different financial institutions have diverging views on the AUD’s future:

Overall judgment: In the first half of 2026, the AUD is likely to fluctuate between 0.68-0.70. Short-term pressures stem from China’s data volatility, while long-term positives include Australia’s resource exports and commodity cycles. The AUD is unlikely to crash (fundamentals are stable, RBA relatively hawkish), but also unlikely to surge to 1.0 (due to ongoing dollar strength).

AUD Fixed Deposit vs Forex Trading: Which Investment Method Is Better?

For investors interested in the AUD, there are mainly two options:

Advantages and Disadvantages of AUD Fixed Deposits

Advantages:

• High safety, principal protected
• Stable, transparent interest income
• Suitable for conservative investors with low risk appetite
• No need to constantly monitor exchange rate fluctuations

Disadvantages:

• Fixed returns, no benefit from currency appreciation
• If AUD appreciates, the fixed deposit yield is offset by opportunity cost of exchange rate gains
• Fixed deposit rates are often below the RBA benchmark rate
• Poor liquidity; early withdrawal may incur interest losses

Advantages and Disadvantages of Forex Trading

Advantages:

• High liquidity and volatility in AUD/USD, suitable for technical analysis
• Can go long or short
• Leverage available (1-200x) to amplify gains
• Low transaction costs, small spreads
• 24-hour market, flexible trading

Disadvantages:

• High risk, potential to lose all invested capital
• Requires technical analysis skills and risk management
• Leverage amplifies losses
• Need to stay updated on global economic data and central bank policies

Which method suits you better?

For investors choosing AUD fixed deposits:

• Retirees seeking stable cash flow
• Conservative investors with low risk tolerance and idle funds
• Professionals who prefer not to spend time on market research

For investors opting for AUD forex trading:

• Those with market knowledge and risk awareness
• Believers in the long-term commodity cycle recovery
• Willing to research central bank policies and economic data
• Able to handle short-term exchange rate fluctuations

Personal advice: If you believe the AUD has a trading opportunity around 0.68-0.70 in 2026, consider allocating some funds to forex trading; if you prefer steady income, AUD fixed deposits remain a simple and effective choice. The key is to decide based on your risk tolerance and time commitment.

Final Investment Tips

As a commodity currency, the AUD is closely linked to global economic cycles. In the short term, the hawkish stance of the RBA and strong raw material prices will provide support, but in the medium to long term, watch for global economic uncertainties and potential dollar rebounds, which will limit the AUD’s upside.

To see a genuine medium-long-term bullish trend in the AUD, three conditions must be met simultaneously:

1. RBA shifts back to a hawkish stance (interest rate expectations materialize)
2. China’s demand substantially improves (commodity demand rebounds)
3. The dollar enters a structural weakening phase (Fed continues rate cuts)

If only one of these is present, the AUD is more likely to remain in a range rather than trend upward.

Whether choosing AUD fixed deposits or forex trading, remember one principle: Diversify risks, invest within your means, and avoid putting all your chips on a single market or currency.