Dollar slides on Chinese data


globe,business,data The Australian dollar is lower after sliding overnight on the back of weaker-than-expected Chinese loan data.

At 0700 AEDT on Thursday, the Australian dollar was trading at 89.09 US cents, down from 89.22 cents on Wednesday.

The local currency began its decline following the release of better than expected US retail sales data earlier this week. But it fell as low as 88.88 US cents overnight on news that China’s new loan demand declined sharply in December, BK Asset Management MD Boris Schlossberg said.

“This was the weakest expansion of credit in more than a year, suggesting that economic activity in China may be decelerating at a faster pace than expected,” Schlossberg said.

“Currency traders quickly reacted to the news pushing the Aussie below the 89 US cent level.

“Just two days ago the Australian dollar-US dollar pair was inching towards 91 US cents, but the short covering rally has clearly run out of momentum and the pair is now once again within reach of testing the yearly lows of 88.50 cents.”

Schlossberg said Australian labour force figures being released on Thursday would determine which way the local currency headed next.

“If the data misses its mark it could trigger an avalanche of selling that could send the Aussie to fresh yearly lows as financial markets will begin to price in the possibility of further rate cuts from the Reserve Bank of Australia,” he said.

“On the other hand, if the data proves to be better than forecast it could start a new short covering rally.

“With sentiment against the Aussie so heavily skewed to the sell side, any positive surprise could quickly push the unit back towards the 90 US cent level.”

Australia’s unemployment rate is expected to remain steady at 5.8 per cent, according to an AAP survey of 14 economists.


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