The Australian dollar to US dollar (AUD/USD) exchange rate hit 3-year highs just below 0.7150 in late January and is currently trading just above the 0.71 level.
Credit Agricole expects further near-term Australian currency gains and has raised the mid-2026 forecast sharply to 0.73 from 0.67 previously. It does expect a reversal in the second half of the year with AUD/USD retreating to the 0.70 level.
Monetary policy will be a key element in the short term, especially after the Reserve Bank of Australia (RBA) move to raise interest rates at the February meeting.
Markets expect further RBA rate hikes over the next few months and are still pricing in two Fed rate cuts this year. Credit Agricole expects these expectations will continue to provide near-term Australian currency support.
The bank does consider that the Australian dollar gains are starting to look over-stretched and the currency is now trading above short-term value based on fundamentals.
Over the second half of 2026, the bank sees scope for a shift in expectations with the possibility that the RBA will only sanction one further rate hike while expectations of Fed rate cuts are liable to fade.
Disclaimer: For information only, not investment advice. This article summarises and interprets third-party research; views expressed are those of the original source and may not fully reflect the source’s complete analysis. Neither the source nor we accept liability for reliance on this interpretation.
