1 Dollar – Australia

In 2016, the Australian dollar (AUD) was characterised by a period of relative stability at historically low levels, following a significant multi-year decline from its post-float highs. The currency traded within a narrow band, mostly between US$0.71 and US$0.78, a stark contrast to the parity it enjoyed with the US dollar earlier in the decade. This subdued level was largely engineered by the Reserve Bank of Australia (RBA), which maintained a record-low cash rate of 1.5% after two cuts in May and August. The RBA's dovish stance was a deliberate strategy to support economic transition, as it openly expressed a preference for a lower exchange rate to boost non-mining sector competitiveness following the end of the mining investment boom.

The primary drivers of the AUD's weakness were divergent monetary policy paths between Australia and the United States, and volatile commodity prices. While the US Federal Reserve began a tightening cycle in late 2015, Australia continued its easing, reducing the interest rate differential and diminishing the AUD's yield appeal. Furthermore, although key export prices for iron ore and coal rebounded unexpectedly during the year, providing some support, this was offset by persistent concerns over slowing growth in China, Australia's largest trading partner. This created a tension between improving terms of trade and underlying global risk sentiment, which kept the currency in check.

Domestically, the lower AUD was welcomed as it aided rebalancing efforts, providing a boost to tourism, education exports, and local manufacturing. However, it also reflected ongoing economic challenges, including subdued wage growth and low inflation, which lingered below the RBA's target band. Overall, the 2016 currency situation represented a managed adjustment—a "lower-for-longer" equilibrium that supported economic transition while policymakers navigated the lingering uncertainties of the post-mining boom era and a fragile global environment.