Could China’s stock market rescue plan provide support for the Australian Dollar (AUD)? Analysts at Société Générale assess the outlook for the Aussie.

Historically, the AUD has closely followed Chinese equities, but this relationship experienced a significant shift in the fourth quarter of 2023. As US interest rates peaked and began to decline, the US Dollar weakened, creating a favorable environment for AUD/USD despite a downturn in Asian stocks. However, 2024 poses new challenges, with AUD/USD facing declines in tandem with falling equities.

In a recent development, Chinese authorities have implemented a substantial rescue package for the stock market. If successful in reinstating investors’ confidence, there is potential for Chinese stocks to play a role in rescuing the Australian Dollar.