Insights 
VT 
China’s National Development and Reform Commission (NDRC) plans to implement key investment projects and enhance government investment structures. Emphasis will be on boosting domestic demand and allocating more resources to improve people’s livelihoods, while curbing local market protectionism.
The AUD/USD pair is observed to have dipped by 0.04%, last trading at 0.6510. Factors influencing the Australian Dollar include interest rates set by the Reserve Bank of Australia (RBA), iron ore prices, and the economic health of China, Australia’s largest trading partner.
Impact of China’s Demand
The RBA affects the AUD through interest rate adjustments aiming for a stable inflation rate of 2-3%. High interest rates support the AUD, while low rates typically weaken it.
China’s demand for Australian exports influences the AUD, with strong Chinese economic performance boosting demand for the currency. Iron ore, Australia’s top export worth $118 billion, impacts the AUD, rising when iron ore prices increase and vice versa.
Australia’s Trade Balance also affects the AUD’s value, with a positive balance generally strengthening the currency. A positive Trade Balance occurs when exports surpass imports, enhancing currency value through increased foreign demand.
China’s announcement to boost government investment is a significant signal for the coming weeks. We should view this as a clear precursor to increased demand for industrial commodities. This policy shift directly supports a more positive outlook for the Australian dollar.
Impact on Iron Ore Prices
This move doesn’t come in a vacuum, as we’ve seen recent data showing China’s Caixin Manufacturing PMI dipping to 49.5 in September 2025. The stimulus is a direct response to that weakness and softer-than-expected Q3 GDP growth. The current AUD/USD level around 0.6510 might not yet reflect the full potential of this spending.
Australia’s fortunes are closely tied to iron ore, its biggest export to China. With prices for 62% Fe iron ore recently hovering near $105 per tonne, this planned infrastructure spending is set to create a strong tailwind. Derivative traders should consider long positions in iron ore futures, anticipating a price recovery driven by renewed demand.
We remember the significant commodity booms following China’s large-scale stimulus efforts after the 2008 financial crisis and again during the 2021 recovery. Those periods saw substantial rallies in both iron ore and the AUD. This new announcement hints at a similar, though perhaps smaller-scale, pattern emerging.
Considering the Reserve Bank of Australia is holding rates steady amid persistent inflation, the AUD has a solid foundation. Buying AUD/USD call options with expirations in the next few months could be a viable strategy to capture the upside. This allows traders to benefit from a potential rally while limiting downside risk.
