The banks expect the Australian dollar to trade at between USD$0.70-$0.78 by the end of 2024.
Interest rates and inflation are the key metrics that will impact the price of AUD in 2024.
43% of Australians think the Australian dollar will get stronger in 2024.
Australian Dollar Predictions for 2024
The general outlook for this year remains optimistic with three major Australian banks expecting the value of the Australian Dollar to increase by the end of 2024.
NAB's Australian dollar forecast is predicting the AUD will trade at 0.73 USD by December 2024. Over the long-term NAB is optimistic and believes the Australian dollar will reach $0.78 by December 2025.
ING's future FX outlook is very positive, they are predicting the AUD/USD exchange rate will be at 0.71 USD by June 2024, and 0.73 USD by December 2024. Sluggish Chinese growth and high interest rates have led to the AUD being the most "undervalued currency in the G10 space" based on their analysis.
Westpac published their economic report in December 2023, predicting the AUD will increase modestly during the year and trade at 0.70 USD by the end of 2024.
Commonwealth Bank think an economic recession is likely in 2024 and it could send the Australian Dollar below 0.60 USD. CBA expects the decrease in value to be short-lived as the FED will cut interest rates in the US faster than expected.
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Finder survey: How many Australians think the Australian dollar will get stronger over the next 12 months?
Response
No
56.67%
Yes
43.33%
Source: Finder survey by Pure Profile of 1004 Australians, December 2023
Key factors impacting the Australian dollar
There are several key factors driving the performance of the Australian dollar, the major ones include:
RBA interest hikes. From a record low of 0.10% in April 2022, the Reserve Bank has made regular increases to the official cash rate, which sits at 4.35% as of August 2024. Interest rate hikes tend to increase foreign investment demand for the AUD, which helps drive the value of the Aussie dollar higher.
Inflation. The Reserve Bank's inflation target aims to keep annual consumer price inflation between 2 and 3%. High inflation tends to drive the value of the Aussie dollar down due to reduced purchasing power.
Economic slowdown. With rising interest rates and inflation impacting economies around the world, there's the very real threat of a global recession. This could lead to reduced demand from China and other Asian countries for Australia's key exports, pushing the value of the Australian dollar down.
Mining. Commodities are a major driver of the Australian economy, with iron ore, coal and other commodities responsible for 67% of all exports. Increases in demand for commodities can drive the value of the AUD up, but falling prices can have a negative effect.
Farming. Agriculture is another important driver of the Australian economy and made up 11.6% of the nation's goods and services exports in 2021-22. The impacts of climate change could affect the farming industry in the years to come, while controversy surrounding live animal exports could also affect cattle and sheep exports.
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How did AUD perform in 2023?
The Aussie dollar was on a downward trajectory for the majority of 2023. After reaching a high on 0.72 USD in late January 2023, it hit yearly lows in October but mounted a small recovery in recent months. Forecasts last year expected the Australian Dollar to be stronger but China's economy has struggled.
Frequently asked questions
While there are multiple factors impacting the value of the Australian dollar, one of the key factors in 2023 has been falling commodities prices. Falling prices have been prompted by China's slower than expected economic recovery after the pandemic. And with commodities exports a major driver of the Australian economy and China our largest trading partner, this has seen the AUD weaken against other major currencies.
It's extremely difficult to predict how any currency pair will perform in the future. Inflation, interest rate hikes and the threat of a recession all have the potential to impact currency values here and overseas, while economic developments in China can also have a significant effect on the AUD's performance. Ultimately, it's essential to do your own research and consider a wide range of factors before deciding whether or not to buy Australian dollars.
From a historical perspective, the Australian dollar has been strong in 2023 against currencies such as the Japanese yen, the South African rand and New Zealand dollar. Check currency charts that track exchange rates over an extended period to get a detailed view of how the AUD is performing.
Tim Falk is a writer for Finder, writing across a diverse range of topics. Over the course of his 15-year writing career, Tim has reported on everything from travel and personal finance to pets and TV soap operas. When he’s not staring at his computer, you can usually find him exploring the great outdoors. See full bio
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