Insights 
VT 
China’s Premier Li Qiang addressed a symposium in Jakarta, discussing the impact of the changing international economic landscape. He mentioned that China is considering new policy tools and unconventional measures in response to these changes.
He noted the fragmentation of industrial and supply chains and increasing trade barriers have impacted global economic development. China aims to strengthen economic cooperation with more countries to mitigate these challenges.
Australian Dollar Influences
The Australian Dollar (AUD) rose 0.38% to 0.6520, influenced by factors including the Reserve Bank of Australia’s (RBA) interest rates. Other driving factors are the price of Iron Ore, Australia’s main export, and the economic performance of China, its largest trading partner.
Relatively high-interest rates set by the RBA can bolster AUD, while lower rates can have the opposite effect. The RBA’s actions in quantitative easing and tightening also significantly influence the Australian economy and the value of AUD.
China’s economic health affects the AUD, as a healthy Chinese economy increases demand for Australian exports. The price of Iron Ore correlates with the AUD’s value, as rising Iron Ore prices can enhance Australia’s Trade Balance, positively affecting the currency.
Li’s comments signal that we are likely on the verge of new monetary experimentation out of China, potentially marking a shift away from orthodox stabilisation policy. This isn’t just a regional issue—it filters through quickly to commodity currencies like the Australian dollar, whose sensitivity to Chinese demand is well established. With trade routes becoming more entangled due to rising tariffs and export controls, any new efforts from Beijing to bolster its economy by non-standard means should be watched carefully for their second-order effects.
Shifting Market Sentiments
The 0.38% lift in the AUD reflects underlying market positioning that’s not solely tied to interest rate expectations anymore. The Reserve Bank’s current hiking bias provides some support, but sentiment seems increasingly influenced by the broader terms of trade. Recent strength in Iron Ore has reinforced this. As we’ve seen time and again, even tentative recovery signs in Chinese construction and infrastructure can add indirect momentum into AUD pricing, given Australia’s export reliance in that area.
As traders, we’re not simply looking at overnight rates. We’re tracking how the RBA is framing its inflation path and where it stands compared to global peers. A relatively hawkish posture can extend AUD’s modest strength, but much depends on how far Chinese policymakers are prepared to go in propping up growth. If upside surprises come in the form of broad stimulus or fiscal loosening—such as increased local government funding or fixed asset investment—expect AUD to lean firmer, especially if commodity prices remain elevated.
Supply chain fragmentation also has more nuanced effects. It isn’t just a headline concern—it’s introducing inefficiencies and leading to the rerouting of trade, all of which can shift the competitive edge between countries. For Australia, any redirection of demand from Chinese industry—whether due to import substitution or industrial overcapacity—will be felt quickly via reduced export volumes or softer commodity prices. Those risks must now be stress-tested, particularly in correlation strategies tied to resource exposures.
From where we stand, AUD remains in a narrow but persuasive uptrend, buoyed by real yields and resilient resource demand. Yet it’s the less predictable behaviour out of Beijing, particularly the application of what Li called “unconventional tools,” that could inject more day-to-day volatility into both outright moves and cross-hedging strategies. Forward curves may start to reflect more of this if options volumes tilt towards higher implieds on China-linked currencies.
In this type of environment, macro traders should extend their focus beyond central bank commentary and pay closer attention to infrastructure news out of China’s provinces, Iron Ore stockpiles at ports, and freight data across the Indo-Pacific. These data points are becoming early warning signs of potential divergence or support for the AUD.
As the RBA’s tightening cycle matures, and with wage growth appearing mixed, the burden of direction may increasingly shift from domestic data to foreign demand-side indicators. With Li’s remarks hinting at faster policy adaptation, the reaction function in China may be shorter and more fluid than previously assumed, and that opens the door for tactical positioning at both the front and belly of the curve.
