## When Will the Australian Dollar Strengthen Against the New Taiwan Dollar? Analyzing Three Major Factors Shaping the Future of the AUD

The Australian dollar is among the top five most traded currencies globally, and the AUD/USD currency pair is one of the most active. As a high-yield currency, the AUD has historically been favored for arbitrage trading, but its performance over the past decade has been disappointing. Since early 2013, the AUD has depreciated by over 35%, far below expectations. Why does the AUD remain weak? Is there a chance for a reversal in the future? These questions directly impact the AUD/NTD exchange rate.

### Three Fundamental Reasons for the Long-Term Weakness of the AUD

The AUD/NTD and AUD/USD trends are closely linked. To understand why the AUD has been underperforming long-term, we need to analyze three aspects:

**Disappearance of the Interest Rate Advantage**
Once, Australia's high interest rates made the AUD a popular target for carry trades. However, with the global rate-cutting cycle, the Reserve Bank of Australia (RBA) currently has a cash rate of about 3.60%, significantly reducing the interest rate differential. The Federal Reserve (Fed) remains hawkish, maintaining a strong dollar interest rate advantage, making it difficult for the AUD to regain attractiveness.

**Commodity Dependence and Weak Chinese Demand**
Australia's economy heavily relies on exports of iron ore, coal, and energy—making the AUD essentially a "commodity currency." When China's economy is robust, commodity prices rise, strengthening the AUD; when China slows, the AUD faces pressure. From 2023 to 2024, China's recovery has been insufficient, with commodity prices remaining subdued, exerting long-term pressure on the AUD and consequently on the AUD/NTD exchange rate.

**The Unshakable Dominance of the US Dollar**
Over the past decade, the US Dollar Index has risen by 28.35%, with major currencies like the euro, yen, and Canadian dollar depreciating against the dollar. This reflects a global phenomenon: the cycle of a strong dollar has not ended. In this context, even if the AUD rebounds, it is likely to face resistance near previous highs.

### When Will the AUD Turn Around? Mid-term Outlook and Key Signals

To forecast the future trends of AUD/NTD and AUD/USD, investors should focus on three key factors:

**RBA’s Monetary Policy Stance**
Recent signals suggest the RBA may raise interest rates again by 2026, with Commonwealth Bank of Australia (CBA) projecting a peak rate of around 3.85%. If inflation remains sticky and the labor market stays resilient, the RBA’s hawkish stance could help rebuild the AUD’s interest rate advantage. Conversely, if rate hikes fall short, the AUD’s support will weaken significantly.

**Strength of China's Economic Recovery**
Australia’s export structure is concentrated in raw materials, with China’s demand being the most critical variable. When China’s infrastructure and manufacturing activity pick up, iron ore prices tend to rise in tandem, benefiting the AUD. Conversely, even if commodity prices temporarily rebound, the AUD may experience a "rise and fall" pattern.

**Interaction Between the US Dollar and Global Risk Sentiment**
The Fed’s policy cycle continues to dominate global FX markets. In a rate-cutting environment, a weaker dollar generally benefits risk currencies like the AUD; however, if risk aversion increases and capital flows back into the dollar, the AUD may decline even if its fundamentals remain unchanged.

### Recent Trends and Rebound Opportunities

In the first half of 2025, iron ore and gold prices surged significantly, and with the Fed beginning a rate-cut cycle, capital flowed into risk assets, pushing the AUD/USD to a high of 0.6636. During this period, the AUD appreciated by approximately 5-7%, supporting the AUD/NTD exchange rate.

However, on a longer-term scale, the upside for the AUD remains limited. Whenever the AUD approaches previous highs, selling pressure increases, reflecting limited market confidence. US tariffs on raw materials further weaken Australia’s commodity currency status.

### Diverging Forecasts from Major Institutions

Different financial institutions have varying outlooks for the AUD:

**Optimistic Views**
Morgan Stanley expects the AUD/USD to rise to 0.72 by the end of 2025, supported by the RBA’s hawkish stance and commodity prices. Traders Union’s model forecasts an average of about 0.6875 by the end of 2026 (range 0.6738-0.7012), rising further to 0.725 by the end of 2027, emphasizing strong Australian labor markets and a recovery in commodity demand.

**Cautious Views**
UBS believes that despite Australia’s resilient economy, global trade uncertainties and Fed policy changes will limit the AUD’s gains, with the exchange rate remaining around 0.68 by year-end. CBA economists are more cautious, predicting the AUD/USD will peak around March 2026 but may decline again by year-end.

### Investment Insights for AUD/NTD

The AUD/NTD trend is closely linked to the AUD/USD and also influenced by the TWD’s movement. Investors seeking to grasp the turning points of the AUD should monitor:

Australian economic data and RBA policy signals, China’s economic recovery and commodity prices, USD trends and global risk sentiment, and the relative strength of the TWD.

For the AUD to break out into a medium- to long-term bull phase, three conditions must be met simultaneously: the RBA returning to a hawkish stance, a substantial improvement in Chinese demand, and a structural weakening of the USD. If only one condition is present, the AUD is more likely to remain range-bound rather than trend upward.

### Trading Opportunities for the AUD

As one of the most active currency pairs globally, AUD/USD offers high liquidity and predictable volatility, making medium- and long-term trend analysis more feasible. Investors can leverage forex margin trading to capitalize on AUD movements, implementing both long and short strategies.

In the short term, the RBA’s hawkish stance and strong raw material prices will provide support. However, in the medium to long term, global economic uncertainties and potential USD rebounds should be watched closely. It is expected that in the first half of 2026, the AUD will oscillate within the 0.68-0.70 range. The AUD is unlikely to fall sharply because Australia’s fundamentals remain solid and the RBA remains relatively hawkish; but it is also unlikely to surge above 0.80 due to persistent structural USD advantages.

Short-term pressures mainly stem from fluctuations in Chinese data, while long-term bullish factors include the resource export cycle and a recovery in commodity markets. Investors should closely track these variables to adjust their AUD/NTD and AUD/USD positions accordingly.