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Dollar hits two week low

 

1083586_95269118The Australian dollar has hit a two-week low after a senior Chinese official ruled out any economic stimulus measure.

At 0700 AEST on Tuesday, the local unit was trading at 93.26 US cents, down from 93.57 cents on Thursday before the four-day Easter long weekend.

Early on Monday morning, the currency fell as low as 93.15 US cents, its weakest level since April 8, after Chinese Premier Li Keqiang said there would not be any programs to fight short-term dips in economic growth.

Economic data last week showed that China’s annual rate of gross domestic product grew by 7.4 per cent in the first three months of 2014, slightly below the government’s 7.5 per cent target.

BK Asset Management managing director Kathy Lien said the Australian dollar and other commodities currencies weakened after the Chinese premier’s comments.

“Chinese Premier Li said they are not considering strong stimulus now because as long as growth is a little higher or lower than 7.5 per cent, their fiscal and monetary policy stance can be kept unchanged,” she said.

“A large part of the rally in the Australian dollar in March was driven by speculation that China could accelerate stimulus and now that they are saying no, some traders are unwinding those positions.”

There is no local economic data out on Tuesday but investors will be waiting for the release of official Australian March quarter inflation figures, due out on Wednesday.

The annual rate of inflation is expected to hit 3.2 per cent, above the Reserve Bank of Australia’s two to three per cent target range.

Economists, however, are confident that it won’t spark an interest rate rise because they expect inflation to ease later in the year.

AAP

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