China’s National Development and Reform Commission (NDRC) plans to start important investment projects and improve government investment structures. The focus will be on increasing domestic demand and allocating more resources to enhance people’s living conditions, while also reducing local market protectionism. The AUD/USD pair has fallen by 0.04%, currently trading at 0.6510. The Australian Dollar’s value is influenced by interest rates from the Reserve Bank of Australia (RBA), iron ore prices, and the economic status of China, which is Australia’s largest trading partner.

China’s Demand Impact

The RBA affects the AUD by changing interest rates to keep inflation steady at 2-3%. High interest rates boost the AUD, while low rates usually weaken it. China’s demand for Australian exports plays a significant role in the AUD’s strength. A strong Chinese economy increases demand for Australian currency. Iron ore, worth $118 billion and Australia’s top export, influences the AUD’s value; it rises with higher iron ore prices and falls with lower prices. Australia’s Trade Balance also impacts the AUD. A positive Trade Balance, where exports exceed imports, usually strengthens the currency by increasing foreign demand. China’s plan to enhance government investment sends a strong signal for the upcoming weeks. This indicates a likely increase in demand for industrial commodities, which supports a brighter outlook for the Australian dollar.

Iron Ore Prices Impact

This announcement follows recent reports showing China’s Caixin Manufacturing PMI fell to 49.5 in September 2025. The stimulus is a response to this decline and lower-than-expected Q3 GDP growth. The current AUD/USD level of about 0.6510 may not fully reflect the potential effects of this spending. Australia’s economy heavily depends on iron ore, its main export to China. With prices for 62% Fe iron ore around $105 per tonne, the planned infrastructure spending is expected to boost demand. Traders in derivatives might consider taking long positions in iron ore futures, anticipating a price recovery from this renewed demand. We can recall the significant commodity booms that followed China’s major stimulus plans after the 2008 financial crisis and during the 2021 recovery. Both times, there were substantial increases in the prices of iron ore and the AUD. This new announcement suggests a similar, albeit smaller, trend might emerge. With the Reserve Bank of Australia keeping interest rates steady amid ongoing inflation, the AUD is in a strong position. Purchasing AUD/USD call options that expire in the next few months could be a good strategy to capitalize on potential gains, allowing traders to benefit from a price rally while minimizing risk. Create your live VT Markets account and start trading now.

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