Bank of America has revised its forecast for the Australian dollar, projecting it to reach US73¢ by the close of 2026 and maintain that level throughout 2027. This represents a significant upgrade from their previous outlook, which estimated the Aussie would end 2026 at US68¢ and fall to US66¢ by Christmas 2027. The revised forecast reflects a more optimistic view of the Australian currency’s potential performance.
The upgrade is attributed to a combination of factors, including rising commodity prices and a weakening US dollar. Analysts are also reacting to the Reserve Bank of Australia’s (RBA) recent decision to increase the cash rate to 3.85 per cent. This hawkish move by the RBA has further bolstered confidence in the Australian dollar. The Reserve Bank of Australia is the nation’s central bank responsible for setting monetary policy and maintaining financial stability.
For the first time in six years, the RBA cash rate is now higher than the US Federal Reserve’s rate, establishing a yield advantage that is predicted to attract international investment into the Australian dollar. Oliver Levingston, FX and rates strategist at Bank of America, noted that a broad rally in commodities, appreciation in Asia FX, and wider rate differentials are central to their bull case for the Aussie. On Wednesday morning, the Australian dollar was trading at US70.19¢.
