AUD Strength Against Yen

China’s October retail sales grew by 2.9% compared to last year. This was slightly higher than the 2.7% forecast but lower than September’s 3.0%. Industrial production rose by 4.9%, missing the 5.5% prediction and down from 6.5% earlier. Fixed asset investment fell by 1.7% year-to-date, worse than the expected decline of 0.8%, compared to September’s 0.5%. Despite this mixed data, the Australian Dollar remained stable. The AUD/USD pair rose by 0.18% to 0.6541. The Australian Dollar also gained strength against the Japanese Yen this week. In currency movements, the AUD rose against the CAD, NZD, and JPY but fell against the USD, EUR, GBP, and CHF.

Chinese Economic Impact on AUD

China’s retail sales and industrial production are essential indicators of consumer spending and industrial output. These figures can influence the Australian Dollar because of the close trade relations, especially since China is Australia’s largest trading partner. China’s economic performance affects Australia’s export volumes, which, in turn, impacts demand for the currency. As of November 14, 2025, the latest data from China shows a mixed but troubling situation. The shortfall in industrial production is particularly concerning, hinting at a slowdown in the manufacturing sector, which is crucial for regional growth. Although retail sales remain steady, weaker industrial output and fixed asset investment indicate a slowing economic recovery. This situation leads to a cautious outlook for the Australian Dollar. With China being Australia’s top export market, a slowdown there directly reduces demand for key commodities. Recent data from major commodity exchanges shows iron ore prices have dropped to around $110 per tonne, down from the $130-$140 range seen in early 2024. The market’s initial muted response to this data may create opportunities for derivative traders in the coming weeks. We see the fundamental outlook for the AUD weakening, making strategies that benefit from a decline in the currency more appealing. This could include purchasing put options on the AUD/USD or taking short positions in AUD futures contracts. The external pressures from China add complexity to the Reserve Bank of Australia’s (RBA) outlook. The RBA has maintained its cash rate at 4.35% for two full years, since November 2023. A decline in demand from its largest trading partner makes future rate hikes unlikely, raising the possibility of rate cuts for 2026. Now, we are focusing on the upcoming high-frequency data for further confirmation of this slowing trend. We will closely monitor the upcoming Caixin Manufacturing PMI from China. Another weak reading could strengthen bearish sentiment and may lead to a more significant drop in the AUD/USD, potentially heading towards the 0.6400 level. Create your live VT Markets account and start trading now.

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