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Chelsea Yang

While global markets watched closely for another joint move by Washington and Tokyo to prop up the Japanese yen this week, Australian dollar traders have been laser-focused on the actions of another economic power: China.
Some analysts view the Australian currency as particularly sensitive to policy moves in Beijing. If China intervenes to boost domestic growth, that could also lift the Australian dollar, the theory goes.
But in reality, the currency’s exposure to the world’s second-largest economy is more selective than commonly assumed, as the link mostly depends on Chinese commodity demand, Goldman Sachs said in a report released on Tuesday.
At first glance, the Australian dollar “appears among the most China-sensitive” of the G10 currencies, a basket of the world’s most heavily traded currencies, according to Lexi Kanter, an analyst at the investment bank.
Goldman ranked Australia as the G10 economy most exposed to an acceleration in Chinese final domestic demand, reflecting both direct exports and Australian inputs used by third countries to produce goods ultimately sold to China.
However, much of the apparent connection between the Australian dollar and the yuan reflects their shared response to broad movements in the US dollar rather than a purely China-specific signal, according to Kanter.
After controlling for the US dollar, only the Australian and New Zealand dollars retained a meaningful positive relationship with the yuan, although the link became “notably weaker”, the analyst said.


Per the report, the most important mechanism connecting China’s economy with the Australian currency was the commodities channel.
China is a major importer of Australian iron ore and liquefied natural gas. Last year, it bought US$73.8 billion – 759 million tonnes – of the materials, Chinese customs data showed. Both are integral in the steelmaking process.
According to Kanter, copper tends to explain more of the currency’s movements than iron ore, despite Australia’s heavy reliance on iron ore exports, because copper serves as “a broader barometer of global cyclical momentum and China growth”.
If Beijing takes more direct measures to shore up China’s economic growth, it could benefit the Australian currency. But Goldman noted the impact would depend on the nature of the policies, as China was shifting away from an investment-driven growth model to a tech-fuelled one.
Housing and investment-driven growth in China has “historically generated larger spillovers to Australia than increases in final consumer demand”, largely because construction and investment require greater commodity inputs, the report said.
Beijing refrained from announcing a broad stimulus during a meeting of the Communist Party’s Politburo in late July, despite second-quarter growth slowing to 4.3 per cent from 5 per cent in the first three months of the year.
China’s 2026 policy agenda calls for expanding the country’s “AI Plus” initiative, setting a goal for artificial intelligence-related industries to exceed 10 trillion yuan (US$1.48 trillion) in value by the end of the year.
But Goldman warned that “persistent weakness in property, infrastructure and broader domestic demand” in China would limit the boost to the Australian dollar, leaving Australian economic data, energy prices and global risk sentiment as more important drivers of the currency over the coming months.


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Currency traders believe Beijing’s economic policies could give the Australian dollar a boost. Analysts say things are more complex in reality


Currency traders believe Beijing’s economic policies could give the Australian dollar a boost. Analysts say things are more complex in reality.


Does Beijing really have the power to lift up the Australian dollar?

.css-1c6uqr6{color:inherit;font-weight:inherit;font-size:inherit;font-family:inherit;line-height:inherit;overflow-wrap:break-word;}Currency traders believe Beijing’s economic policies could give the Australian dollar a boost. Analysts say things are more complex in reality

Currency traders believe Beijing’s economic policies could give the Australian dollar a boost. Analysts say things are more complex in reality