Australian Dollar Rises on Support from China Stimulus
The Australian Dollar (AUD) snapped a four-day losing streak against the US Dollar (USD) on Monday (13/1), stabilizing near its lowest level since April 2020. The AUD gained support from recent Chinese stimulus measures, helping the AUD/USD pair stage a modest recovery. Given the close trade ties between Australia and China, any changes in China’s economic conditions could significantly impact the Australian market.
The China Foreign Exchange Committee (CFXC) pledged to support the Chinese Yuan during its meeting in Beijing on Monday, which was held under the direction of the People’s Bank of China (PBOC). Separately, the PBOC and the State Administration of Foreign Exchange (SAFE), China’s foreign exchange regulator, announced an increase in the macroprudential adjustment parameter for cross-border financing from 1.5 to 1.75, effective January 13, 2025.
China’s trade surplus expanded in December, with the Trade Balance reaching $104.84 billion, beating the estimate of $99.8 billion and the previous balance of $97.44 billion. Exports rose 10.7% year-on-year, beating the estimate of 7.3% and the previous estimate of 6.7%. Imports, meanwhile, increased 1% year-on-year, compared with the estimate of a 1.5% decline and the previous decline of 3.9%.
The AUD also found support after the release of the TD-MI Inflation Gauge, which rose by 0.6% month-on-month in December, a significant acceleration from the 0.2% increase recorded in November, reaching its highest level since December 2023. On a yearly basis, the Inflation Gauge rose by 2.6%, down from the previous increase of 2.9%.
The Australian dollar is facing downward pressure as markets are now pricing in a 75% chance of a rate cut by the Reserve Bank of Australia (RBA) next month. Investors are expected to closely monitor Australian employment data, due later this week, for additional clarity on the RBA’s policy outlook.
Source: FXStreet
