AUD/JPY holds losses below 102.50 on weak Australian GDP report
- AUD/JPY softens to around 102.25 in Wednesday’s early Asian session.
- Australian Gross Domestic Product grew 0.4% QoQ in Q3, weaker than expected.
- China’s RatingDog Services PMI report will be in the spotlight later on Wednesday.
The AUD/JPY cross loses ground to near 102.25 during the early Asian session on Wednesday. The Australian Dollar (AUD) weakens against the Japanese Yen (JPY) following the Australian economic data. Traders will take more cues from China’s RatingDog Services Purchasing Managers Index (PMI) report later on Wednesday.
Data released by the Australian Bureau of Statistics (ABS) on Wednesday showed that the Australian economy grew 0.4% QoQ in the third quarter (Q3) of 2025, compared with the 0.6% growth in Q2. This figure came in weaker than the expectations of 0.7%. Meanwhile, the annual Gross Domestic Product (GDP) expanded by 2.1% versus a 1.8% growth in Q2, while below the consensus of a 2.2% increase.
The Aussie attracts some sellers in an immediate reaction to the downbeat Australian GDP report. The economic growth reading followed Reserve Bank of Australia (RBA) Governor Michele Bullock’s comments on Tuesday that the economy had likely already hit its potential growth limit.
Growing expectations of the Bank of Japan (BoJ) rate hike could also underpin the JPY and create a headwind for the cross. BoJ Governor Kazuo Ueda said that the Japanese central bank would consider the "pros and cons" of raising interest rates at its next policy meeting. Ueda further stated that the likelihood of the BoJ’s baseline scenario for growth and inflation being realized is gradually increasing.
Traders will keep an eye on China’s RatingDog Services PMI, which is due later in the day. The Services PMI is expected to decline to 52.0 in November from 52.6 in October. In case of a surprise upside outcome, this could provide some support to the China-proxy Aussie, as China is a major trading partner of Australia.
Australian Dollar FAQs
One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.
The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.
Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.
The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
