The Australian Dollar has decreased by 2.9% against the US Dollar, 3.4% against the Japanese Yen, and 3.8% against the Swiss Franc, primarily due to news of China’s retaliation.
Commodity currencies are very responsive to global growth, often increasing in risk-on environments and decreasing during negative sentiment.
China Influences On Australian Dollar
Given that China is Australia’s largest trading partner, the Australian Dollar is particularly influenced by macroeconomic events related to China.
Currently, the AUD is declining most against “safe haven” currencies such as the USD, JPY, and CHF.
These market fluctuations provide an opportunity for beginners in foreign exchange to gain valuable experience.
The initial section outlines the recent drop in the Australian Dollar against three major currencies: the US Dollar lost 2.9%, the Japanese Yen 3.4%, and against the Swiss Franc the local currency slid by 3.8%. This retreat has occurred just as news spread that Beijing is implementing retaliatory measures—an event likely triggering risk-averse behaviour among investors. The reaction has highlighted a tendency for traders to pull out of higher-risk currencies like the AUD in favour of historically more stable ones.
Broadly speaking, what we’re seeing is the familiar behaviour of commodity-linked currencies during times of global unease. These tend to thrive when investor sentiment is upbeat and investors are willing to seek growth—but when the mood shifts, they sink. The Australian currency, being heavily tied to demand from Asia, and especially from China, is particularly prone to showing weakness when the outlook in that region starts to dim.
Market Reactions To Global Events
What this means, in plain terms, is that the news out of China is taking a direct toll on the Australian Dollar. With Beijing responding more assertively, markets sense uncertainty and seek protection in currencies that tend to hold their value better during unstable periods. That’s why we’ve seen the largest falls against those regarded as safer bets—the Yen, the Swiss Franc, and the US Dollar.
For those of us actively analysing price movements, especially in short-term instruments, the implications are clear—momentum remains tilted against the AUD unless incoming data offers a surprise in Australia’s favour or tensions begin to ease. Reacting accordingly, we should monitor economic releases from China closely. An unexpected uptick in Chinese factory orders, for example, could shift sentiment fast. But in absence of such drivers, selling pressure may persist.
From a derivatives point of view, we must now re-evaluate short-term volatility ranges and manage directional bias carefully. With implied volatility ticking up, pricing in higher uncertainty makes sense. As traders, keeping exposure aligned with daily trend strength rather than attempting to pre-empt reversals is the safer route—at least based on what we’ve seen over the last several sessions.
Stevenson’s remarks earlier this week reminded us that thinner trading conditions ahead of regional holidays might also exaggerate moves. We’ve already noticed that liquidity has been patchy beyond the Tokyo and London sessions, so that adds another layer of caution when holding positions overnight.
While some may lean toward opportunistic entries around current levels, we expect that systematically favouring setups aligned with directional conviction will reward more consistently than fade approaches in this environment. Continue to treat rallies with suspicion for now, especially when they lack clear catalyst. And keep an eye not just on China’s economic signals—but on tariffs, comments from senior officials, and changing trade flows, particularly in iron ore and coal, which underpin much of Australia’s export revenue.
Traders with exposure deeper into the forward curve should consider rebalancing delta if spot continues to drift lower, especially if strike clusters start to show congestion near previous support levels. That, more than anything, could determine short-term pressure points.
