Australian dollar gains due to strong Chinese economy

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"Australian Dollar Strength"

The Australian Dollar began the week positively, recovering previous losses. This is expected mainly due to Australia’s upcoming Consumer Confidence report and strong Chinese Yuan and ASX 200 performances.

The surge in the Australian Dollar can be attributed to robust economic health indicators from Australia’s leading trade partner, China. The strength of the Chinese Yuan, along with impressive performances from the ASX 200, has boosted the Australian dollar’s trend.

The Australian government has committed to supporting a rise in the minimum wages adjusted for inflation by 2024. Meanwhile, the uplift of the Chinese Yuan is partly due to significant state banks reportedly selling off their USD/CNY holdings.

The AUD/USD pair continues to trend upwards despite setbacks in the US dollar due to increased US Treasury yields. The Australian Consumer Price Index for February and the U.S. fourth-quarter GDP for 2023 are key data releases to watch.

The Australian currency has significantly benefited from the ASX 200 Index’s strong performance.

Australian dollar’s rise linked to Chinese strength

The PBOC’s decision to set a higher-than-expected mid-rate for the onshore yuan has sent positive signals to the market, indicating optimism for Australian exports, which heavily rely on Chinese demand.

The commencement of the Federal Reserve’s easing cycle is predicted to cause instability in the U.S. dollar. This could influence global finance markets and pose significant risks, especially for emerging economies heavily reliant on the U.S. dollar.

The Australian Employment Change exceeded expectations by reaching 116.5K for February, signaling promising economic prospects. The jobless rate also fell to 3.7%, lower than the anticipated 4.0%, highlighting a thriving labor market.

Premier Li Qiang’s verification of low inflation rates and manageable central government debt proportions demonstrates the potential for China’s fiscal policies. In contrast, the President of the Federal Reserve Bank of Atlanta adjusted his prediction for interest rate cuts this year due to stable inflation and superior economic data.

Currently, the Australian Dollar hovers near 0.6530, with potential barriers at 0.6541 and 0.6550. However, a significant psychological support level at 0.6500 might influence future movements.

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