The ten-year dilemma of exchanging Australian dollars for New Taiwan dollars: Can it be resolved in 2026?

The AUD to TWD exchange rate has underperformed for nearly a decade, reflecting the fading appeal of the Australian dollar as a high-yield currency. As the fifth-largest traded currency globally, the AUD was once favored for carry trades, but over the past ten years, the AUD/TWD exchange rate has generally declined. From its peak in early 2013 to the end of 2023, the AUD has depreciated over 35% against the USD, which has also put pressure on the AUD/TWD rate. Entering 2025, despite rebounds in iron ore and gold prices and the Federal Reserve starting to cut interest rates, the AUD has experienced short-term rallies, but medium- to long-term depreciation pressures remain unresolved.

Three Major Drivers Will Determine the Future of AUD to TWD

To understand why the AUD/TWD exchange rate is stuck, it’s essential to grasp the three core variables influencing the AUD. These factors interact to determine whether the AUD can break out into a genuine upward trend.

First is the Reserve Bank of Australia (RBA)’s interest rate policy and the interest rate differential structure. The AUD’s reputation as a high-yield currency hinges on Australia’s interest rates remaining above those in the US. Currently, the RBA’s cash rate is about 3.60%, with market expectations of another rate hike in 2026. The Commonwealth Bank estimates the peak rate could reach 3.85%. If inflation persists and the labor market remains resilient, the RBA’s hawkish stance will support the AUD/TWD exchange rate; otherwise, if rate hike expectations fade, the AUD will face significant depreciation pressure.

Second is China’s economic performance and commodity prices. Australia’s economy heavily depends on commodity exports, especially iron ore, coal, and energy. Therefore, the AUD is essentially a commodity currency, closely linked to Chinese demand. When China’s infrastructure and manufacturing sectors recover, iron ore prices tend to rise, and the AUD/TWD rate reflects this increase quickly. Conversely, if China’s economic momentum weakens, even short-term rebounds in commodities may not sustain the AUD’s gains, leading to a pullback.

Third is the US dollar’s trend and global risk sentiment. The Federal Reserve’s policy cycle remains a key driver of forex markets. In a rate-cut environment, the USD typically weakens, benefiting risk currencies like the AUD. However, if risk aversion rises and funds flow into the dollar, the AUD may be pressured even if fundamentals are stable. Recent market sentiment has improved somewhat, but concerns over global energy supply and demand persist, prompting investors to avoid cyclical currencies like the AUD.

For the AUD to truly reverse its downward trend against the TWD, all three conditions must align: hawkish RBA policy, genuine improvement in Chinese demand, and a structural weakening of the USD. If only one or two are present, the AUD is more likely to remain range-bound rather than trend upward.

Medium-Term Outlook Based on the USD Trend

The long-term weakness of the AUD largely reflects a sustained strong-dollar cycle. Since early 2013, the USD index has risen over 28%, while major currencies like the AUD, EUR, and CAD have depreciated against the USD, marking a broad USD dominance period.

Even with recent rebounds in the AUD/TWD, the AUD/USD is expected to appreciate only about 5-7% by 2025. However, each time the AUD approaches previous highs, selling pressure increases, indicating limited investor confidence in a long-term rally. Analysts attribute this mainly to ongoing US trade tensions and tariffs, which have dampened raw material exports and weakened the AUD’s commodity currency advantage. Additionally, the persistent interest rate differential favoring the US and the lack of clear growth drivers in Australia further constrain the AUD’s upside against the TWD.

Technically, the AUD in the first half of 2026 is likely to oscillate between 0.68 and 0.70 USD, influenced by China’s data releases and US employment reports. A sharp collapse is unlikely because Australia’s fundamentals remain relatively stable, and the RBA maintains a hawkish stance, but breaking through the structural USD strength ceiling remains difficult. Short-term risks include weak Chinese economic data, while long-term support comes from the potential recovery of Australia’s resource exports and commodity cycles.

2026 AUD Outlook and Risk Divergence

Market forecasts for the AUD/TWD future diverge significantly. Morgan Stanley is optimistic, projecting the AUD/USD could reach 0.72 by the end of 2026, supported by the RBA’s hawkish stance and rising commodity prices. The Traders Union’s models estimate an average exchange rate of about 0.6875 (range 0.6738–0.7012) by late 2026, rising further to 0.725 by 2027, driven by strong Australian labor markets and commodity demand recovery.

UBS adopts a more conservative view, noting that despite Australia’s economic resilience, global trade uncertainties and potential Fed policy shifts could limit gains, with a forecast near 0.68 at year-end. The Commonwealth Bank’s economists suggest the AUD’s rebound may be temporary, expecting the AUD/USD to peak in March 2026 but possibly retreating again by year-end. Wall Street analysts warn that if the US avoids recession but the dollar remains super-strong, the AUD will struggle to break above 0.67.

These differing views highlight the market’s uncertainty: short-term recovery is possible, but a sustained upward trend lacks sufficient fundamental support. Investors should be aware that forecasts often diverge from actual market movements, and short-term volatility may exceed expectations. Medium- to long-term positioning should consider the risks of both bullish and bearish scenarios.

Practical Strategies for Investing in AUD

The AUD/USD is among the top five most traded forex pairs, offering high liquidity and low spreads, making it ideal for short- and medium-term trading. Investors can participate in AUD/TWD fluctuations through forex margin trading, utilizing long and short positions, leverage of 1–200x, and other tools to seek profit in different market conditions.

However, all investments carry risks. Forex trading is high-risk, and investors should be fully aware of the potential to lose all invested capital. It’s advisable to use prudent leverage, adjust according to personal risk tolerance, and set stop-loss and take-profit levels to manage risk. Keeping an eye on RBA policy statements, Chinese economic data, and the USD index can improve trading success.

Long-Term Outlook for AUD against TWD

As a commodity currency, the AUD’s trajectory remains highly correlated with iron ore, coal, and other raw material prices. Short-term support comes from the RBA’s hawkish stance and strong commodity markets, but medium- to long-term risks include global economic uncertainties and potential US dollar rebounds, which could limit the AUD’s gains against the TWD and lead to more volatile movements.

While forex markets are inherently volatile and short-term predictions are challenging, the AUD’s high liquidity, predictable volatility patterns, and clear economic structure make medium- and long-term trend analysis more feasible. Investors seeking to capitalize on AUD/TWD opportunities should monitor RBA decisions, Chinese economic indicators, and the USD index continuously. Positioning should only be considered when multiple favorable conditions align; otherwise, range trading or cautious observation is prudent. The future of the AUD depends on whether these fundamental factors can shift in tandem, rather than on isolated positive news.