The Australian dollar has surged to over 70 US cents, representing a 12.29% increase over the past year. This rise can be attributed to two primary factors: Donald Trump’s economic policies and RBA Governor Michele Bullock’s monetary stance.
The currency strengthened from 62 to 70 US cents annually, though it declined against the Euro from 61 to approximately 59 euros during the same period. Acceleration occurred since August when inflation concerns intensified domestically.
The big two driving this appreciation are Donald Trump and RBA boss Michele Bullock. Trump’s tariff policies aim to weaken the US dollar, making American exports cheaper while increasing foreign goods’ costs domestically.
Diverging Central Bank Policies
The divergence in central bank policies significantly impacts currency movements. The US Federal Reserve maintains rates between 3.5%-3.75%, compared to Australia’s 3.6% cash rate. Powell has resisted rate cuts despite Trump’s pressure, while Australian rates face likely increases throughout 2026.
Our dollar is driven by interest rates or commodity prices for our mining and agricultural exports. Gold prices hitting record highs, alongside rising costs for iron ore, lithium, and uranium, support the dollar’s strength.
Winners and Losers
For travelers and importers, the stronger currency offers advantages through cheaper overseas holidays and reduced petrol prices. However, exporters receiving payments in weaker foreign currencies face headwinds when converting earnings home.
The appreciation supports inflation reduction through cheaper imports, potentially easing RBA pressure. The cash rate will likely increase from 3.6% to 3.85% in coming weeks, with additional hikes probable unless inflation declines substantially.
So if you’ve been thinking about that overseas trip, now might be a good time to book your ticket while the Aussie dollar is riding high.
