Australian dollar’s top forecasters say winning run likely over
The currency has fallen an average 1% in September over the past five years, data shows
Published Mon, Aug 31, 2026 · 06:11 AM
THE Australian dollar’s two-month rally may be nearing a peak, with some of its top forecasters warning that bets on another central bank interest-rate hike have gone too far.
The Aussie will fall as much as 3.7 per cent by year-end, according to SB1 Markets AS. Banco Santander SA sees the currency at 70 US cents by the end of the year, while Danske Bank AS expects it to retreat to that level by as early as December. The currency closed on Friday (Aug 28) at 71.64 US cents.
Those bearish calls follow a more than 3.5 per cent gain in the Aussie since the start of July as sticky inflation fuelled bets on a Reserve Bank of Australia rate hike as soon as next month.
Economic growth data due this week may test those wagers, with some analysts expecting no tightening from the central bank in the near-term, a shift that may temper the Aussie’s rally.
The currency “has been a very strong performer in Q3 with ample scope for profit taking,” said Stuart Bennett, Santander’s head of Group-of-10 currency strategy, who correctly called the Aussie’s peak earlier this year and topped Bloomberg’s forecaster rankings in the first two quarters.
“We still think the Reserve Bank of Australia will stand pat, so some paring back of rate-hike expectations should help by year end.”
SB1 Markets is also bearish on the Aussie, saying any sign the Middle-East conflict is ending will help bring down oil prices.
Assuming there’s a resolution in the Iran war and crude starts to flow, “it will weigh negatively on commodity exposed currencies such as the Australian dollar,” said Dane Cekov, a senior macro strategist at SB1 Markets in Oslo.
Still, “the Aussie dollar rally can absolutely continue if oil and gas prices spike before year-end,” he said.
The Aussie has also benefited from weakness in the US dollar, as Treasury Secretary Scott Bessent’s efforts to tamp down long-term bond yields raised questions about the greenback’s appeal as a haven. But that support may prove less durable following Federal Reserve Chairman Kevin Warsh’s hawkish rhetoric at the central bank’s annual conference in Jackson Hole, Wyoming.
Many of the tailwinds that helped push the Aussie higher in the first half of the year “could soon be turning around,” said Antti Ilvonen, a strategist at Danske Bank, who ranks third in Bloomberg’s currency forecaster rankings. “My base case is still that RBA will remain on hold in September and delay the hike decision into Q4.”
Technical indicators point to the Aussie’s bullish momentum being stretched, while seasonality also favours a pullback. The currency has fallen an average 1 per cent in September over the past five years, data compiled by Bloomberg show.
“In real terms it is looking quite expensive, and if it moves higher it may be drifting even further into overbought territory,” Santander’s Bennett said. “Of course that doesn’t mean the market won’t continue to overshoot, but does suggest the brakes should come on sooner rather than later.” BLOOMBERG
