The Australian dollar faces competing pressures at the midpoint of calendar 2026, according to ANZ’s Mahjabeen Zaman, but the medium-term outlook for the currency is generally positive.
Factors in the interest rate environment that had supported the $A have now declined, Zaman told ANZ Institutional Insights, but other macroeconomic elements would continue to support the currency.
“We're actually pretty optimistic on the $A,” she said. “But of course there are going to be push and pull factors.”
The Reserve Bank of Australia (RBA), which according to Zaman has been “ahead of the curve” on inflation this cycle, has lifted interest rates three times in 2026, taking the official cash rate to 4.35 per cent.
While this has “helped the yield advantage of the $A so far”, Zaman said, that support is unlikely to continue.
“Going forward we don't think the RBA is going to hike anymore,” she said. “So the impulse from the rate side is probably not going to be as positive.”
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Other factors that have buoyed the $A are likely to remain in place, Zaman said, including risk sentiment related to ongoing geopolitical uncertainty, which “remains supportive”.
“And as long as energy prices remain elevated there's going to be a little bit of an impulse there for the Aussie as well,” she said.
ANZ Research expects the Australian dollar to be at “75 US cents into year end”, Zaman told Insights.
“At the same time, of course, we do have a view that the US dollar will also weaken and that will then support the $A,” she said.
Zaman said pressures on the US dollar were expected to continue.
“At the end of the day, the number one driver for US dollar weakness is US policy uncertainty,” she said. “Given that market has been moving to headline risk, I don't think there's any limits [to] that.”
