In this comprehensive FXOpen article, we delve into the future of the Australian dollar (AUD), exploring how domestic economic trends, global market dynamics, and central bank policies are expected to influence its value. As we navigate through potential fluctuations and opportunities, this article serves as a valuable resource for traders and investors looking to understand the AUD's prospects. Join us to uncover the analytical predictions for the AUD in 2024 and beyond.

The Australian Dollar's Recent Performance

The Australian dollar has navigated a complex landscape from 2019 through 2023, reflecting the influence of global and domestic factors on its performance against the US dollar (USD). Head over to FXOpen’s free TickTrader platform to interact with real-time charts and observe how the Aussie dollar has moved over the years.

In 2019, the AUD experienced minor fluctuations around 0.70 USD, concluding the year with a slight decline of -0.34%. The onset of the COVID-19 pandemic in 2020 brought substantial volatility, plunging the Australian dollar to a low of 0.55 USD. However, as global markets began to recover, the AUD rebounded strongly to close the year at 0.77 USD. This recovery was broadly attributed to rallying equity markets and commodity prices.

The year 2021 saw the AUD start robustly at 0.77 USD but face downward pressure in the middle of the year, closing out 2021 around 0.72 USD. This downward trend continued into 2022, which saw it fall to a yearly close of 0.68 USD. Deteriorating global economic conditions and shifts in monetary policy were considered key factors behind this bearish movement.

In 2023, the AUD oscillated between around 0.63 and slightly above 0.71 USD, ultimately closing the year at approximately 0.68 USD, underlining the ongoing adjustments in both the global and domestic economic landscapes. After slipping to 0.65 USD in February 2024, the Australian dollar saw a substantial spike at the beginning of March, worth around 0.66 USD at the time of writing.

Several critical drivers influenced the AUD's trajectory during this period. The pandemic's immediate impact and the subsequent recovery phase were pivotal, affecting global market sentiment towards the Australian dollar. The dynamics between the Reserve Bank of Australia (RBA) and the Federal Reserve's interest rate policies also played a significant role, with the AUD reacting strongly to shifts in monetary policy and interest rate differentials.

Commodity prices, given Australia's status as a major exporter, alongside China's economic health and the broader economic performance of both Australia and the US, significantly contributed to the AUD's performance. Notably, in 2023, the decline was partly attributed to broader economic concerns, which made the USD stronger despite the anticipation of a US recession. However, by the end of the year, the USD weakened, which contributed to the strength of the Aussie.

Australian Economic Outlook for 2024

The Australian economic landscape in 2024 is anticipated to navigate through a phase of subdued growth, reflecting the interplay of various domestic and global influences. Economic expansion is expected to remain moderate in the near term, largely due to persistent inflationary pressures and the impact of higher interest rates on domestic demand.

The Reserve Bank of Australia has adjusted its forecast for gross domestic product growth downwards, primarily owing to a dimmer outlook for household consumption. This revision mirrors concerns over the immediate economic trajectory, with household spending predicted to face challenges amidst declines in real disposable incomes and a significant drop in the household savings ratio to 3.2% in Q4 2023.

From late 2024, a gradual recovery in economic growth is forecasted, driven by an anticipated decline in inflation and a consequent easing of pressures on household incomes. The expected fall in inflation is partially attributed to a faster-than-anticipated decrease in goods price inflation and somewhat softer domestic demand than previously thought.

The labour market is forecasted to adjust further towards a state largely in line with full employment over the next couple of years, despite nominal wage growth expected to remain robust in the near term before gradually moderating. Such adjustments are critical in the context of Australia's inflation trajectory and economic recovery.

Globally, economic growth is poised to be below average, with major trading partners' year-average GDP growth expected to decelerate in 2024, contributing to weaker demand for Australian exports. This global outlook, characterised by softer economic growth and a moderated easing in labour markets, mirrors the external challenges confronting Australia's economic recovery.

Risks to Australia's economic outlook appear broadly balanced, with potential deviations in demand and inflation being the key areas of concern.

Initially, softer-than-anticipated demand could lead to a faster return to the inflation target but at a potential cost of higher unemployment as businesses navigate lower revenues. However, inflation persisting above the target range could necessitate a more prolonged period of elevated interest rates, meaning households would be forced to contend with rising living and borrowing costs, potentially leading to a sharp drop in demand.

Overall, the Australian economy in 2024 is set against a backdrop of cautious optimism. While challenges in the form of inflationary pressures and higher interest rates loom large, the latter half of the year is considered to hold potential for recovery.

Analytical Australian Dollar Forecasts for 2024

In 2024, the Australian dollar is forecasted to navigate through a landscape shaped by domestic economic conditions, central bank policies, and global market dynamics. The RBA's monetary stance, particularly the maintenance of its interest rate at 4.35% into mid-2024, alongside the Federal Reserve's indication of reducing its benchmark rate to 4.5-4.75% by year-end, suggests a potential narrowing of the interest rate differential between the two, which is forecast to favourably impact the AUD strength.

While Australia’s economic growth is expected to be moderate in the near term, a gradual economic recovery anticipated in late 2024 could provide support for the AUD. Likewise, Australia's significant export profile and commodity prices will remain critical determinants of the AUD's value.

Fluctuations in key commodities like iron ore and coal could directly influence the currency's performance. Moreover, the growth rates of its trading partners, geopolitical tensions, and the state of trade relations could send AUD higher or lower, depending on whether they favour Australian exports.

Note that all forecasts are expressed against the US dollar.

AUD to USD Forecasts for 2024

Bank-Based

Q1 2024:

• Most Bullish Bank Projection: 0.69 (NAB and JP Morgan)
• Most Bearish Bank Projection: 0.65 (Citibank, ING, and Trading Economics)

Q2 2024:

• Most Bullish Bank Projection: 0.71 (NAB)
• Most Bearish Bank Projection: 2024: 0.67 (MUFG and ING)

Q3 2024:

• Most Bullish Bank Projection: 0.72 (NAB)
• Most Bearish Bank Projection: 0.68 (MUFG)

Q4 2024:

• Most Bullish Bank Projection: 0.73 (NAB)
• Most Bearish Bank Projection: 0.64 (Citibank and Trading Economics)
  

Note: Trading Economics isn’t a bank but uses manual analysis to create forecasts.

Algorithm-Based

Q1 2024:

• Most Bullish Algorithm-Based Projection: 0.671 (Long Forecast)
• Most Bearish Algorithm-Based Projection: 0.654 (Financial Forecast Center)

Q2 2024:

• Most Bullish Algorithm-Based Projection: 0.664 (ExchangeRates)
• Most Bearish Algorithm-Based Projection: 0.63 (Gov Capital)

Q3 2024:

• Most Bullish Algorithm-Based Projection: 0.682 (Long Forecast)
• Most Bearish Algorithm-Based Projection: 0.586 (Gov Capital)

Q4 2024:

• Most Bullish Algorithm-Based Projection: 0.69 (ExchangeRates)
• Most Bearish Algorithm-Based Projection: 0.604 (Gov Capital)

Analytical Australian Dollar Forecasts for 2025 and Beyond

For 2025 and beyond, the AUD is anticipated to traverse a complex economic terrain, influenced by both domestic economic recovery and external factors. The Reserve Bank of Australia's inflation-targeting approach is expected to guide its monetary policy, with inflation projected to align with the RBA's 2-3% target range by 2025 and aiming for the midpoint by 2026. This anticipated alignment suggests a cautious optimism for interest rate adjustments, potentially easing as inflationary pressures subside.

The Australian economy is forecasted to experience a resurgence in growth from late 2024, buoyed by an improvement in household incomes and a consequent uplift in consumption. This domestic revival, coupled with the RBA's monetary policy stance, is poised to play a pivotal role in shaping the AUD's performance against major currencies.

Globally, the AUD's trajectory will also be influenced by the synchronisation of monetary policies among advanced economies, geopolitical events, and the global economic outlook, particularly the demand for Australian exports. Commodity prices will continue to be a significant driver, given Australia's export-oriented economy, with price fluctuations directly impacting the AUD's value.

Trade relations, especially with China, alongside developments in global trade agreements, will further impact the AUD. Positive advancements could bolster the AUD, while tensions or disruptions may pose challenges.

In essence, according to AUD to USD long-term forecasts, the Aussie dollar is expected to be shaped by the interplay between achieving sustainable economic growth, maintaining inflation within the target range, and adapting to changing global economic conditions. While there are potential tailwinds from domestic economic recovery and commodity market dynamics, headwinds from global economic uncertainties and trade relations could introduce volatility.

Australian Dollar Forecasts for 2025

Q1 2025:

• Most Bullish Projection: 0.75 (NAB)
• Most Bearish Projection: 0.622 (Wallet Investor)

Q2 2025:

• Most Bullish Projection: 0.77 (NAB)
• Most Bearish Projection: 0.612 (Wallet Investor)

Q3 2025:

• Most Bullish Projection: 0.78 (NAB)
• Most Bearish Projection: 0.594 (Wallet Investor)

Q4 2025:

• Most Bullish Projection: 0.78 (NAB)
• Most Bearish Projection: 0.59 (Wallet Investor)

Australian Dollar Forecasts for 2026

Mid-Year 2026:

• Most Bullish Projection: 0.75 (Westpac)
• Most Bearish Projection: 0.656 (Wallet Investor)

End-of-Year 2026:

• Most Bullish Projection: 0.73 (NAB)
• Most Bearish Projection: 0.628 (Long Forecast)

Australian Dollar Forecasts for 2027

Australian Dollar Forecasts for 2028

The only Australian dollar predictions for 2028 are from Wallet Investor at 0.514 mid-year and 0.492 end-of-year. No further forecasts could be identified.

General Factors Influencing the Australian Dollar

The Aussie is influenced by a myriad of factors that impact its value on the global stage. These drivers can be categorised into domestic economic conditions, global market trends, and geopolitical events. Here’s a concise overview of the key factors:

• Interest Rate Differentials: The difference between Australian interest rates and those of major economies, like the US, Europe, and Japan, significantly affects the AUD. Lower Australian rates relative to others may deter foreign investment, negatively affecting the AUD.
• Commodity Prices: As a major exporter of commodities, Australia's currency often fluctuates with the global prices of resources like iron ore, coal, and natural gas. Higher commodity prices may potentially strengthen the AUD.
• Economic Performance: Robust economic indicators, such as GDP growth, high employment rates, and low inflation levels within Australia, can potentially enhance the AUD's attractiveness to investors.
• Global Economic Conditions: The overall health of the global economy, including the economic performance of major trading partners and global equity markets, may influence AUD valuations.
• Geopolitical Events: Tensions and uncertainties in geopolitics, including trade disputes and wars, may affect risk sentiment, which may negatively impact the AUD.
• Capital Flows: The flow of investments into and out of Australia, driven by the global investment landscape and domestic opportunities, may potentially sway the AUD's strength.
• Foreign Exchange Market Interventions: Rare interventions by the Reserve Bank of Australia in the foreign exchange market may directly influence the AUD's value.

The Bottom Line

The Australian dollar's trajectory through 2024 and beyond is expected to be shaped by a complex interplay of domestic economic factors, global market trends, and central bank policies. As traders and investors navigate this landscape, staying informed and adaptable is key. For those looking to engage with the AUD's dynamic movements, opening an FXOpen account offers a gateway to the forex market. FXOpen provides the tools and resources that may potentially help traders to make informed decisions and capitalise on currency fluctuations.

FAQs

Why Is the Australian Dollar Falling?

The Australian dollar's decline can be attributed to factors such as lower interest rates in Australia compared to major economies, fluctuations in commodity prices, and broader economic concerns that affect global and domestic investor sentiment.

Why Is the Australian Dollar So Weak?

The weakness of the Australian dollar often results from a combination of lower domestic interest rates, adverse shifts in global commodity markets, and uncertainties in the global economic landscape that diminish its attractiveness to investors as the Aussie is considered a risky asset.

Will the Australian Dollar Rise?

The potential for the Australian dollar to rise is considered to be contingent on increases in commodity prices, improvements in Australia's economic indicators, and favourable shifts in the interest rate differential with major economies alongside global economic recovery trends.

This article represents the opinion of the Companies operating under the FXOpen brand only. It is not to be construed as an offer, solicitation, or recommendation with respect to products and services provided by the Companies operating under the FXOpen brand, nor is it to be considered financial advice.