Look for AUD, NZD Strength As China Tries to Boost Economy

The Australian dollar has shown strong upward momentum this month, with AUDUSD initially dipping below 0.6350 in early August before rebounding sharply and gaining over 3 cents, approaching the upper boundary of its previous range near 0.67. This upward movement has been supported by efforts from China to stabilize its economy, which has been facing challenges throughout 2024.

After hitting a new low for 2024 at 0.6350 on Monday, the AUD/USD pair managed to recover, climbing back above 0.66 by Tuesday and returning to a consolidating range. The Reserve Bank of Australia (RBA) has maintained its policy stance, with Governor Bowman noting that the board has not discussed any interest rate cuts. This stability has contributed to the Australian dollar’s strength, particularly as the RBA remains one of the few major central banks not reducing rates.

AUD/USD Chart Daily – Testing the Top of the Previous Range

The Australian dollar, often seen as a risk-sensitive currency due to its close ties with China’s economy, could further benefit from China’s recent efforts to stimulate growth. Despite signs of economic weakness in 2024, the Chinese government has been working to support its economy, including measures announced over the weekend. These actions could provide additional support for commodity-linked currencies like the AUD and NZD. Key initiatives and strategies include:

1. Private Investment Projects: The National Development and Reform Commission (NDRC) is focusing on offering investment opportunities to private investors, particularly in essential infrastructure sectors such as transportation and energy.
2. Government Funding: The central government will provide financial support for significant private investment projects that meet specific eligibility criteria, ensuring that crucial developments receive necessary backing.
3. Financing Support Policies: In collaboration with the National Financial Regulatory Administration, the NDRC will create policies aimed at facilitating financing for private investments, encouraging further participation from the private sector.
4. Cross-Agency Collaboration: The NDRC will work closely with the Ministry of Natural Resources and the Ministry of Ecology and Environment to ensure support in land and sea usage and environmental impact assessments, streamlining the process for private investment projects.

AUD/USD Live Chart