Austr dollar plunges after China data

The Australian dollar was savaged in Asia today on the back of weak China trade data for March.

The Australian dollar was savaged in Asia today on the back of weak China trade data for March.

China’s exports slid 15 per cent from a year earlier in March while imports dropped 12.7 per cent, General Administration of Customs data showed.

National Australia Bank currency strategist Ray Attrill said the weakness in the report reflected slumping prices for commodities like iron ore, and weak global demand in general.

China’s economy grew 7.4 per cent last year, the slowest pace in 24 years, and the government has set an even lower target of about 7 per cent growth for this year.

The Australian dollar was trading at US75.95c at 5:30pm (AEST) well down from US76.95c late on Friday.

Further falls in the Australian dollar appear likely.

ANZ said that the Aussie had failed to mount a rally in recent weeks, despite the Reserve Bank of Australia’s surprise decision not to cut interest rates, plus recent weakness in the US dollar amid signs of a cooling in the world’s biggest economy.

“The rally looks even more tepid when one takes a slightly more panoramic view of the events of the past few weeks,” ANZ said.

The market has absorbed news of weakness in US payrolls; China cut interest rates and eased restrictions on property ownership, and there has been some improvement in the data in Australia.

The market appeared to still be focusing on broader structural headwinds to the currency and these continue to point to further downside risks, ANZ said.

Selling of the Aussie dollar intensified amid reports that the conservative government in Australia is expected to lower its forecasts for the price of iron ore.

Treasurer Joe Hockey said the government might factor an iron-ore price as low as US$35 a tonne into its coming 2015-16 budget, a move that will force downgraded revenue and growth forecasts. As recently as December, the conservative government forecast a budget surplus based on an estimated price of US$60 a tonne for 2015-16.

Mr Hockey told The Wall Street Journal on Thursday that hefty revenue writedowns would be forthcoming in the May 12 budget. He said the decline in the price of the country’s biggest export was the central challenge of the budget.

Iron-ore prices have fallen more than 30 per cent since the start of January, as new supply from Western Australia’s Pilbara region swamped the market. Prices had already fallen by nearly half in 2014.