Australian dollar perched near 2025 high as yields climb, commodities soar

The Australian dollar hovered near a new 2025 peak on Monday as firm local yields and strong commodity prices underpinned its near-term outlook, though the kiwi trailed behind.

The Aussie was buoyant at $0.6714, after surging 1.6% last week to a 14-month high of $0.6724.

That was the biggest weekly rise since April and brought its annual gain to 8.5%, the first in five years.

The impressive year-end rally has been driven in part by rising bond yields, as markets have swung to price in the risk of a 2026 tightening by the Reserve Bank of Australia.

Against the low-yielding Japanese yen, the Aussie held at 104.81 yen , after gaining 0.7% on Friday to a new 17-month peak of 105.16.

Record-high commodity prices, such as gold, silver and copper, also boosted demand for the Antipodean.

If the explosive moves in precious metals and critical commodities continue to accelerate in 2026, Australia’s currency and stock markets are positioned for outperformance, IG analyst Tony Sycamore said.

“As a major commodity exporter with vast reserves of these in-demand materials, Australia offers direct leverage, making AUD/USD and the ASX200 compelling plays for the coming year.”

Australian government bonds suffered another year of losses, with the benchmark 10-year yield up almost 40 basis points to 4.745%.

Three-year bond yields rose 30 bps to 4.114%.

The kiwi was 0.1% lower at $0.5825, after gaining 1.4% last week.

However, it is facing heavy resistance at a three-month high of $0.5853 and is up just 4.2% for the year. New Zealand’s low interest rates leave little allure for carry trades, particularly versus the yen.

Investors are also wagering that the Reserve Bank of New Zealand will hold its cash rate at 2.25% for many meetings to come, with the first hike not fully priced until October next year.