The Australian dollar rose against its U.S. counterpart on Oct. 19 after China reported stronger quarterly growth, putting renewed focus on the close trade relationship between the two economies.
Reuters put the currency at about US$0.6980, up 0.52%, in a market report later that day. China's economy expanded 4.5% from a year earlier in the third quarter, up from 4.3% in the second, the National Bureau of Statistics of China said. The latest figure exceeded the 4.4% forecast in a Reuters poll.
In 2025, trade in goods and services with China made up one-quarter of Australia’s total trade, figures from the Department of Foreign Affairs and Trade show. That exposure helps explain why Chinese growth figures draw attention in Australian currency markets.
Reserve Bank of Australia (RBA) Assistant Governor (Financial Markets) Christopher Kent separately said the bank judged Australian financial conditions to be “somewhat restrictive” but was examining whether they were restrictive enough. He did not announce a policy change.
Kent said evidence pointed to rising neutral interest rates, particularly overseas. A neutral rate neither encourages nor discourages economic activity; if it rises, a given policy rate provides less restraint. Kent stressed that estimates are uncertain and cited fiscal spending and investment, including investment related to artificial intelligence, as possible influences.
At its Sept. 29 decision, the RBA increased its cash rate target by 25 basis points to 4.60%, effective Sept. 30. The bank said it could raise the rate again if needed to bring inflation back to target.
China's figures showed uneven activity beyond the GDP reading. In September, value added among industrial enterprises above the designated size rose 5.5% from a year earlier, while retail sales of consumer goods increased 1.1%. Real estate development investment fell 20.6% year over year in January-September.
Kent said higher rates are painful for struggling mortgage holders who have not built savings buffers. He also noted that a stronger Australian dollar can reduce oil costs paid in local currency. In a discussion of the Australian dollar's valuation, he recalled that an elevated currency had made it harder for the RBA to support growth during the mining investment boom.
The Australian Bureau of Statistics is due to release September consumer price data on Oct. 28. The RBA's next rate announcement is scheduled for Nov. 3.
