Australian dollar finds demand at 'lower levels' but concern continues to grow over the slowing growth in the Chinese economy

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Category: Australian Dollar News

Written by Rob Samson

International Money Transfers at our sister site

"It could be the first sign of cooling Chinese demand for Australian commodities and AUDUSD saw some slippage on the headlines" - Gareth Berry at UBS.

The Australian dollar (Currency:AUD) has advanced this morning following a day in the red on Monday and pretty poor economic numbers out of China.

The pound to Australian dollar exchange rate is 0.2 pct in the red at 1.5186.

The Australian dollar to US dollar exchange rate is 0.21 pct higher at 1.0227.

China’s June trade data presented a mixed picture on the macro front, but the details brought uniformly bad news for the Australian dollar according to a note from UBS.


"Although the trade balance was much stronger than expected at $31.72 bn (cons. $24 bn), imports in general only grew modestly, and imports of iron ore in particular were down -8.6% m/m," says Gareth Berry at UBS.

A monthly decline on this scale is not unheard of and is still within the realm of monthly statistical variation.

"However, it could be the first sign of cooling Chinese demand for Australian commodities and AUDUSD saw some slippage on the headlines," suggests Berry.

It could be that the Australian currency is finding support on technical buying, as "there seems to be solid demand for AUD/USD at lower levels, which should sustain the AUD in the event of further European shocks. Key data today will be the China trade data and NAB survey in Australia," says a note from ANZ Bank.

But there remain concerns over the growing evidence of a continuing slowdown in Chinese growth, and this will weigh fairly heavily on the aussie dollar moving forward.

"Sterling is trading above 1.52 this morning and a further bounce is realistic amid ongoing negative sentiment," says Richard Drive at Caxton FX.