The Australian Dollar (AUD) is holding firm against the US Dollar (USD) this week, fueled by encouraging news from China — Australia’s biggest trading partner.
China’s economy grew 4.8% year-on-year in the third quarter of 2025, signaling stability in Asia’s largest economy despite global uncertainty. For Australia, that’s a major boost, as its exports—from iron ore to agriculture—are deeply tied to Chinese demand.
Here’s the thing: whenever China shows signs of growth, the Australian Dollar tends to follow suit. And that’s exactly what we’re seeing now.
Why China’s Growth Matters for the Aussie Dollar
Think about it this way — Australia sells a massive portion of its natural resources to China. So, when Chinese factories ramp up production, Australian exports rise, and investors naturally see the AUD as more attractive.
China’s GDP expanding by 1.1% quarter-over-quarter—beating the 0.8% forecast—reflects stronger industrial output and improved consumer activity.
Industrial Production grew 6.5%, outpacing expectations, and Retail Sales also showed steady improvement. All of this helps keep the demand for Australian exports strong, cushioning the economy even as domestic inflation and job concerns rise.
Central Banks Stay Cautious
On Monday, the People’s Bank of China (PBoC) kept its Loan Prime Rates unchanged at 3.00% (1-year) and 3.50% (5-year), signaling a steady approach to supporting growth without overheating the market.
Meanwhile, the Reserve Bank of Australia (RBA) faces growing pressure to cut rates in November after unemployment rose to 4.5%, its highest in nearly four years.
Still, RBA officials have hinted that the central bank is watching global data closely. If China continues to expand, it could ease pressure on the RBA to loosen policy too aggressively.
US Dollar Under Pressure
While the Aussie is climbing, the US Dollar is slipping. The ongoing government shutdown in the U.S.—now one of the longest in history—has shaken investor confidence.
Add to that growing expectations of multiple Fed rate cuts, and it’s clear why traders are shifting towards currencies like the AUD that are benefiting from stronger regional data.
Market tools now price in nearly a 100% chance of a Fed rate cut in October, and a 96% chance of another in December, adding more weight to the Aussie’s advantage in the short term.
Technical View: Where AUD/USD Stands Now
The AUD/USD pair is trading around 0.6510, testing resistance near its 9-day Exponential Moving Average (EMA) of 0.6517.
If buyers manage to push it higher, the next key targets lie around 0.6547 (50-day EMA) and 0.6580, where the current downtrend channel tops out.
On the downside, strong support remains at 0.6430 and 0.6414, levels that could act as safety nets if momentum cools.
What This Means for Traders
For investors, this moment represents a delicate balance: the Australian economy faces domestic pressure from slower job growth, but global tailwinds—especially from China—are providing much-needed support.
If China sustains its recovery and U.S. rate cuts weaken the Dollar further, the AUD could remain one of the more resilient major currencies this quarter.
Frequently Asked Questions
1. Why does China’s economic growth affect the Australian Dollar?
Because China is Australia’s largest trading partner. When Chinese demand for Australian exports rises, it boosts Australia’s income and strengthens its currency.
2. Could the RBA cut rates soon?
Yes. With unemployment rising, there’s a strong chance of a rate cut in November. However, steady global growth could make the RBA more cautious.
3. Why is the US Dollar weakening right now?
The U.S. Dollar is under pressure due to the prolonged government shutdown and growing expectations that the Federal Reserve will cut rates multiple times this year.