Insights 
VT 
China’s Commerce Ministry recently announced plans to address development concerns and ensure global supply chain stability. The current value of AUD/USD is down by 0.05% at 0.6490, illustrating the impact of global economic signals.
The Australian Dollar (AUD) is heavily influenced by the Reserve Bank of Australia’s (RBA) interest rates, which are crucial in managing national inflation. As Australia’s major export is iron ore, its price significantly impacts the AUD, especially given China’s role as a primary export destination. Market sentiment also plays a role, affecting whether the AUD rises or falls based on global risk appraisal.
The Role Of The Reserve Bank Of Australia
RBA’s control over interest rates affects the economy broadly, with a target inflation rate of 2-3%. Higher rates, compared to other central banks, support the AUD, while quantitative measures can either increase or decrease its strength. China’s economic health directly impacts AUD demand, with fluctuations in Chinese growth data shaping Australia’s export dynamics.
Iron ore exports, valued at $118 billion in 2021, are critical, as price shifts alter Australia’s Trade Balance. A positive Trade Balance strengthens the AUD. This balance, driven by export-import disparities, ultimately influences the currency’s value as global trade conditions shift.
China’s recent statements are a response to growing concerns over its economic momentum. We’ve seen this reflected in the latest official NBS Manufacturing PMI, which dipped to 49.8 for September 2025, signaling a slight contraction. This weaker outlook directly impacts demand for Australian resources.
This softness in China has weighed on iron ore prices, a critical driver for the Australian dollar. After trading robustly above $130 per tonne for periods back in early 2024, prices are now hovering around $108, creating a headwind for the AUD. The lower commodity revenue directly affects Australia’s trade balance, which we’ve seen narrow over the last quarter.
Potential Shift In RBA Stance
Domestically, the Reserve Bank of Australia appears to be shifting its stance. With the latest Q3 2025 inflation data coming in cooler than expected at 3.2%, market chatter has grown louder about potential interest rate cuts in the first half of 2026. This contrasts with the situation two years ago, in 2023, when the central bank was aggressively hiking rates.
Given these factors, we see traders positioning for potential further weakness in the AUD/USD pair, which is currently near 0.6490. One approach is to purchase put options to profit from a decline in the currency’s value. December 2025 puts with a strike price around 0.6350 could offer a way to capitalize on this bearish sentiment.
However, the Chinese government’s pledge to “safeguard global supply chain stability” introduces uncertainty. Any significant stimulus announcement could cause a sharp reversal, catching bearish positions off guard. Therefore, using defined-risk strategies like bear put spreads, which limit potential losses if the AUD unexpectedly rallies, should be considered.
