Consensus says 0.72–0.73.
I think we’re heading to 0.80.

Not tomorrow. Not in a straight line. But structurally, we’re heading higher.

And if you step back, the setup looks very familiar.

We’ve Been Here Before (2008–2010)

Everyone remembers parity. But most forget how we got there.

It wasn’t a straight line, it was messy, volatile, and gradual.

Early 2009: 0.6247
November 2010: above 1.00

We had a 60%+ move in under 2 years. And importantly:

There were sharp pullbacks
There were risk-off shocks
But the trend held

Now look at today:

December 2024: 0.6178
April 2026: 0.7222

That’s already a 17% move, with similar behaviour:

Sharp peaks
Meaningful retracements
But an underlying grind higher

Even more telling…

We’ve seen this climb during geopolitical tension, including conflict between Iran and the US. That’s typically risk-off, USD-positive.

Yet AUD has held and pushed higher. That’s not weakness, that’s underlying demand.

If macro conditions were cleaner, we’d likely already be much higher.

Here are my three Reasons AUD Continues Higher:

1. Interest Rate Differential Is Shifting Again

This is the big one, and it’s being underappreciated. Markets are increasingly pricing:

Australia 4.50–4.75% by year-end
US Fed easing toward 3.00–3.25% into 2027 and potentially lower deep into 2027 with the Feds clear easing bias.

That’s a large shift. We’re moving from:

USD yield dominance (2022–2024)

to

AUD yield support (2026 onwards)

This is exactly what drove AUD strength post-GFC… and it’s starting to happen again.

Importantly, this isn’t just about rates. it feeds directly into terms of trade.

As export prices strengthen and Australia earns more per unit of exports, it naturally supports the currency.

The chart below highlights how the push to parity began in 2009, when the RBA held rates above 3% while the Fed cut to record lows. By the end of 2026, we expect to see this gap begin widening again:

2. Commodities Are Quietly Strengthening

Australia’s currency is still a commodity currency… and the key drivers are moving:

Iron Ore stabilising and rebounding
Coal holding firm
LNG structurally strong
Gold near highs
Copper signalling global growth recovery

We’re not seeing a China-led super cycle like 2010. Let’s be very clear, that’s not coming back and was a huge driver for our run to parity… But we don’t need that for 0.8000.

We just need:

Stable demand
Gradual upside
No collapse

That’s enough to support AUD higher. The chart below shows the parity run, where sharp moves across the five key commodities helped drive AUD strength:

Below is a comparison of the same five commodities, highlighting their YoY growth.:

3. The Market Wants to Sell USD

This is the most under-discussed factor. Why?... flow matters.

Right now:

Every risk-on move = USD selling
USD is no longer the preferred hold
Diversification away from USD is increasing

You’re seeing it in:

Portfolio flows
Corporate hedging behaviour
Central bank reserve allocation

With rising concerns around US debt levels and long-term fiscal sustainability, global investors are becoming more selective with USD exposure.

At the same time, reserve managers are gradually diversifying, not aggressively, but enough to matter over time.

When sentiment shifts away from USD, it creates sustained pressure.

Let’s Be Clear - This Is NOT a Parity Call!!!

I am not calling parity and you shouldn’t be either. The 2010 move was driven by:

Explosive China growth
Massive commodity demand
Clean macro backdrop

We don’t have that today. Instead, we have:

Slower global growth
Geopolitical risk
Structural uncertainty

So manage expectations.

What I do see, based on experience and current market dynamics:

0.73 by Q3 2026
0.74 - 0.75 by year-end
0.80 test by mid to late 2027 (if rate differential holds)

Not explosive, but steady. A grind higher. If we maintain even a modest rate advantage, combined with stable commodity demand and continued USD selling, the path to 0.80 becomes realistic, not extreme.

As an IMPORTER… What Should You Do About It?

This is where most businesses get it wrong.

They position for stability… in a market that’s trending.

1. Reduce Your Hedging Tenor:

If AUD is rising:

Do not lock long-term at low levels. Instead:

Focus on 2–4 month hedging windows (SHORT TERM)
Stay flexible (Don’t over commit, reduce your hedging volumes)
Allow yourself to benefit from higher spot rates

Long-dated hedging in this environment is a trap.

2. Maintain Cover, But Don’t Overcommit

You still need protection. But:

Don’t be over-hedged
Don’t remove your upside

The goal is simple:

Stay covered, but stay flexible, If you overuse leverage or over-hedge:

You get stuck at old rates
You miss the move

3. Keep It Simple

In bull markets, complexity hurts you. You don’t need:

Over-engineered options
Long-dated structures

Instead:

Use short-term forwards
Consider participating forwards (protection + upside)

If you like outperformance products then allocate maybe 20% of exposure… That’s it. Outperformance has a cost and that is leverage and long term hedging which are the two things I am warning against.

Final Thought

Importers have been waiting years for this.

Higher AUD = better margins, better pricing, better outcomes.

We’re now seeing:

Structural support
Improving terms of trade
Market flow alignment
Commodity backing

The AUD is going higher.

Not in a straight line. But directionally, it’s clear.

Position yourself to benefit from it.

Because if you don’t… you’ll watch it happen instead of capitalising on it.

Written by Danny Pezeshki