Australian dollar holds up despite China data

The Australian dollar was well supported in Asia today despite news over the weekend of weak China trade and factory-price data.

The Australian dollar was well supported in Asia today despite news over the weekend of weak China trade and factory-price data.

Traders said the unit remained in demand after Australia’s central bank indicated last week that it no longer feels the currency is overvalued and needs to fall further to adjust with falling commodity prices.

The comments fanned renewed debate about the need for a further interest rate cut. Futures pricing has reduced the likelihood of a cut in the next six months as a result.

Attention will fall back on the Reserve Bank of Australia with speeches by senior officials, including RBA Deputy Governor Philip Lowe on Wednesday and head of forecasting Chris Kent on Friday.

“The RBA clearly made a case for switching from a moderate easing bias to more neutral stance,” said Stephen Innes, a senior trader at OANDA Australia and Asia Pacific.

“While the central bank reiterated a drop in the Aussie dollar was likely, there was none of the more aggressive jawboning mantra that the RBA has expressed in the past,” he added.

The Australian dollar was trading at US73.90c at 5pm up from US73.71c late Friday.

The weak China data also prompted chatter that China may need to announce more stimulus to support growth.

China’s exports in July slid 8.3 per cent from a year earlier, reversing a gain of 2.8 per cent in June, and imports fell for the ninth month in a row, dropping 8.1 per cent, after a decline of 6.1 per cent in June.

The Chinese government also announced that factory prices in July extended more than three years of declines, with the producer-price index taking its biggest year-over-year tumble in nearly six years.