After several years of steadily declining, the Australian dollar staged a meaningful recovery in 2025, culminating in a two-cent rally over the past month.

Since the start of the year, the value of the Australian dollar has risen by more than 6% against the US dollar, reversing a sizeable chunk of the falls that occurred through 2022–24.

But is the most recent jump the start of a new trend for 2026? Or just another blip?

Last week the US central bank, the Federal Reserve, cut interest rates for the third time in a row – down by 0.25 percentage points to around 3.6%, its lowest level in nearly three years.

That decision came just after the Reserve Bank of Australia (RBA) kept rates on hold at 3.6%. The RBA governor, Michele Bullock, also signalled more rate cuts here are unlikely for “the foreseeable future”.

In the days immediately after the US Fed’s decision, the Australian dollar did what textbook economics would predict: it rose, briefly hitting a three-month high of around US$0.667.

The link between US monetary policy and the Australian dollar is often misunderstood.

A US rate cut does not directly make Australia richer or poorer. Instead, it alters global financial conditions in ways that matter for currencies.

The most straightforward way US decisions affect us here in Australia is with interest-rate........

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