The Australian dollar is expected to see its first annual gain since 2020, supported by the country's high interest rates and potential Chinese stimulus efforts. Various financial institutions, such as Westpac Banking Corp. and Bank of America Corp., project that the Aussie could reach as high as 68 cents by December, indicating an increase of 8.4% from the previous week's closing rate. The Reserve Bank of Australia's decision to avoid lowering interest rates has contributed to the currency's strength, with upcoming inflation data set to provide further insight on the effectiveness of their cautious strategy. Additionally, China's commitment to boost domestic spending in response to US tariffs has enhanced the appeal of the Australian dollar.

Market analysts warn that President Donald Trump's trade policies could negatively impact US economic growth and weaken the dollar. Expectations for a gradual recovery in the Australian dollar from the second quarter onward are driven by a combination of factors including a weakening US dollar, delayed effects of Chinese stimulus, and a potentially higher RBA terminal policy rate supported by persistent inflation levels. Despite a recent decrease in bearish positions on the Aussie by hedge funds, economic projections anticipate a strengthening of the Australian dollar to 64 cents in the second quarter due to factors such as a depreciating US dollar and assessments against historical commodity prices and rate spreads.