AUD Strength Against Yen
China’s Retail Sales for October grew by 2.9% compared to the previous year, slightly above the forecast of 2.7% but lower than September’s 3.0%. Industrial Production saw a 4.9% increase, falling short of the 5.5% prediction, and down from 6.5% recorded earlier.
Fixed Asset Investment showed a decline of 1.7% year-to-date, worse than the anticipated decrease of 0.8%, and further down from September’s 0.5%. The release of this mixed data did not greatly affect the Australian Dollar, with the AUD/USD pair increasing by 0.18% to 0.6541.
The Australian Dollar strengthened against the Japanese Yen during the week. In currency movements, the AUD showed increases against the CAD, NZD, and JPY but faced declines against USD, EUR, GBP, and CHF.
Chinese Economic Impact on AUD
China’s economic data, particularly Retail Sales and Industrial Production, are key metrics reflecting consumer spending and industrial output. These metrics can influence the Australian Dollar due to trading links and the impact on global market sentiment, especially given China’s role as Australia’s largest trading partner. Economic performance affects Australia’s export volumes, impacting currency demand.
Based on the date of November 14, 2025, the latest economic figures from China present a mixed but concerning picture. The miss on Industrial Production is the most significant takeaway, pointing to a slowdown in the manufacturing engine that drives much of the region’s growth. While retail sales held up, the weakness in industrial output and fixed asset investment suggests the economic recovery is losing momentum.
For us, this reinforces a cautious outlook on the Australian Dollar. Given China is Australia’s primary export market, a slowdown there directly impacts demand for key commodities. We are already seeing this pressure, as recent data from major commodity exchanges shows iron ore prices have softened to around $110 per tonne, a notable drop from the $130-$140 range seen in early 2024.
The market’s initial subdued reaction to this data may present an opening for derivative traders in the coming weeks. We believe the fundamental picture for the AUD is weakening, suggesting strategies that profit from a decline in the currency are becoming more attractive. This could include buying put options on the AUD/USD or establishing short positions in AUD futures contracts.
This external pressure from China complicates the outlook for the Reserve Bank of Australia. Looking back, the RBA has held its cash rate steady at 4.35% for two full years now, since November 2023. Weakening demand from its largest trading partner makes any future rate hikes extremely improbable and brings the possibility of rate cuts into sharper focus for 2026.
Therefore, our attention now turns to the next set of high-frequency data for confirmation of this slowing trend. Specifically, we will be watching the upcoming Caixin Manufacturing PMI out of China very closely. Another weak reading would likely reinforce bearish sentiment and could trigger a more decisive move down in AUD/USD, potentially toward the 0.6400 level.
