Australian Dollar: Carry and growth support potential rebound – HSBC

HSBC strategists argue AUD/USD has room to rise into 2027, supported by Australia’s relatively high cash and government bond yields, which make the Australian Dollar attractive on a carry basis within G10 FX. They also note AUD/USD may have already bottomed, given the currency’s sensitivity to global growth and resilient United States (US) activity, especially when the Fed is on hold.

Australian Dollar backed by yield and growth

"We continue to see scope for AUD/USD upside into 2027, supported by Australia’s relatively high absolute yield levels – across both cash rate and government bond yields – which leave the AUD screening favourably on a carry basis within G10 FX (i.e., borrowing in a lower-yielding currency to invest in a higher-yielding one)."

"We also see reasons to believe AUD/USD may have bottomed out, given the AUD’s strong ties to global growth momentum."

"Resilient US activity has supported that backdrop and can benefit growth-sensitive G10 currencies, with the AUD typically performing well in this environment – particularly when the Fed is on hold."