Australian Dollar Rallies On China Import Data
The Australian dollar as trade data released by China indicated that imports –– in terms of the dollar –– declined to its slowest rate since the year 2014.
In dollar terms, Chinese imports fell in May by 0.4 percent year on year (YoY), which is considerably better than the 6.8 percent YoY fall forecasted. The sentiment related Aussie dollar gained against most of its currency counterparts based on this news.
The Shanghai composite index fell by 0.8 percent at the ASX close after the country’s exports fell by 4.1 percent YoY, which highlighted the fall in worldwide demand for manufactured goods.
This was the slowest reduction of goods purchased from overseas countries since the year 2014. Changing economic conditions in China can stimulate a response in other global markets. In this scenario, the Australian dollar climbed higher based on the situation in the second largest economy in the world.
The surplus of trade was reported at $49.98 billion, which is worse than the expected $55.70 billion, but higher than the reported figure of $45.56 billion in the previous month of April. Exports fell 4.1 percent, which is worse than the estimated 4.0 percent and quicker than April’s decline of 1.8 percent. The trade balance surplus of China rose to CNY324.80 billion, in comparison to the estimated CNY387.20 billion.
Many economists believe that the local Australian economy needs to wait for US and Europe recovery for China’s exports to sustain positive growth, which in turn will benefit Australia. Even though experts don’t believe that there will be a strong import rebound in the near future because of falling domestic demand around a firmer financial environment, China will prospectively see a substantial trade surplus over the course of the next few months.
The Australian dollar has climbed higher against the US dollar and looks set for more rises in the coming months, which is good news for the local economy. The Aussie dollar also rose on the Reserve Bank of Australia’s decision to keep the cash rate constant with stronger commodity prices. Oil prices are also on the rise for the first time in over a year, which may prove to be good news for the economy in time.
Meanwhile, an Australian Bureau of Statistics report on home loans indicated that the number of loans increased in April 2016 by 1.7 percent, which is lower when compared against the forecasted figure of 2.5 percent.