Bank of America anticipates the Australian dollar will climb to 0.68 against its US counterpart by the end of 2025. The projected rebound is expected to take shape from the second quarter of that year, largely driven by a weaker greenback.
Factors Supporting The Aud
This forecast hinges on a broad view that the USD will lose strength, creating favourable conditions for an appreciation in its Australian peer. Additional forces are also expected to lend support. Stimulus efforts in China, for instance, are predicted to take time before their full effects show, with the latter half of 2025 being key in that regard. Since Australia is heavily tied to Chinese demand, particularly for commodities, any uptick in China’s economy would likely filter through, providing more backing. Meanwhile, with inflation running persistently high, Australia’s central bank is likely to maintain comparatively tight policy settings. A higher peak in interest rates would make Australian assets more attractive, offering further assistance to the currency’s rise.
These expectations point to the probability of movement in currency markets in the coming months. If the USD weakens as foreseen, there will be implications across multiple asset classes. Traders who focus on instruments influenced by exchange rates need to closely observe how incoming data aligns with these projections. Any deviation from anticipated inflation trends or shifts in central bank policy could lead to adjustments in forecasts.
The timeline for a turnaround in the AUD depends not only on factors within Australia but also on external conditions. Any change in the pace or scale of China’s economic measures could advance or delay the expected boost. Likewise, if inflation conditions globally push the US Federal Reserve to adjust its stance, the expected decline in the USD might not unfold as predicted. Those involved in related markets should be mindful of how these elements play out, as gaps between expectation and reality often lead to swift corrections.
Impact Of Investor Sentiment
It will also be necessary to keep a watchful eye on shifts in investor sentiment. If risk appetite increases, capital may flow towards risk-sensitive currencies, accelerating the expected trajectory. Alternatively, if unexpected shocks arise, the projected path could see interruptions. Keeping track of market positioning and broader economic signals will be as valuable as focusing on any single forecast.
