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Australian dollar’s comeback could be short-lived

CommBank economists forecast a stronger Australian dollar in the months ahead but warn the gains could fade as US economic strength returns.

26 September 2025

Cash register with australian currency

CBA Economists recently published a research note on the outlook for the Australian dollar - below is an overview the analysis.

  • The Australian dollar is expected to peak in value against its US counterpart in March next year.
  • But it’s expected to fall again by the end of 2026.
  • The US dollar is expected to weaken in the near term but could rebound as America’s growth outpaces other major economies.

AUD: The comeback kid?

The latest FX strategy report from CBA’s Global Economic & Markets Research team forecasts the Australian dollar (AUD) will move higher against the US dollar (USD) over the next few months.

“The AUD is benefiting from a weaker USD and strong investor sentiment,” said Joseph Capurso, Head of Foreign Exchange, International & Geoeconomics.

But the gains may not last. “We expect the recovery to fade as the US economy regains momentum and Chinese growth remains subdued,” Mr Capurso said.

US economic recovery to weigh on AUD

The report anticipates the USD will bottom out in early 2026 and then begin a gradual recovery, driven by tax cuts, modest interest rate reductions, and investment from overseas.

The fading impact of US tariffs and a rebound in economic growth are expected to support the USD through 2026 and 2027.

CommBank economists also expect oil prices to fall, and this, combined with elevated global oil stockpiles, will weigh further on the US currency.

China slowdown adds pressure

The AUD’s performance is closely tied to China’s economic outlook. The report warns that even if Beijing announces a stimulus package to boost the economy before year-end, structural issues in property, banking and demographics will likely hold back demand for metals — dragging on iron ore, oil and gas prices.

The report flags several risks to the outlook, including political uncertainty in the US, unresolved US-China trade tensions, and potential shifts in central bank policy.

Subscribers to CBA research can view the full report below (login required):

Wholesale customers: see here

Retail Customers: see here

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