Resilience in the strength of the Australian dollar could lead to mixed outcomes for the local macroeconomic environment, according to Head of FX Research Mahjabeen Zaman, with potential disinflationary effects balanced by a reduction in export competitiveness.
The Australian dollar — “the currency of the year within the G10 space”, according to Zaman — has had a very strong start to 2026, breaking through the 71-US-cent barrier for the first time since 2022.
Speaking to Institutional Insights on video, Zaman said there were “pros and cons” to the likelihood that strength could become a medium-term trend, even if the shifts are marginal.
“The pros are that imports are now going to be cheaper,” she said. “At the margin, this could help disinflationary trends as well. And I think that's great for households.
“On the other side of things, of course, a higher Australian dollar does not help our [export] competitiveness.”
Zaman said context was important, given the Australian currency has been trading in a “pretty low range… for quite some time now”.
“But, when we think about Australian competitiveness, we are the lowest-cost producers in many of the commodities that we export,” she said. “So again, even at that margin we may not see significant impact.”
{video}
Zaman said the market perception of the US dollar had changed in the wake of conflict in the Middle East, with the currency strengthening after a period of relative weakness.
“And the reason for that really is because the US is a net energy exporter,” she said. “As a result of that, given that oil prices have moved higher, the US dollar has also gained.
“[It’s] similar to what the Australian dollar has done. We are also a net-energy exporter, which is one of the reasons why we have been resilient.”
Zaman also touched on drivers of the Australian dollar’s strength, and how global uncertainty is impacting other currencies in the Asia-Pacific region. Watch the video above to find out more.
