Aussie Surges, Euro Recovers with China’s Economy

CURRENCY PAIRS – After data showed steady Chinese economic growth in the first quarter, the Aussie shot to a two-month peak on Wednesday, helping it shake off earlier losses.

From the previous $0.7206, the Aussie was 0.2 percent higher at $0.7190, its strongest since Feb. 21. A four-month peak of 80.71 was also touched by the Japanese yen.

Australia is China’s biggest trading partner, which makes the Aussie sensitive to Chinese economic movement.

On Wednesday, above expectations, official data showed that from a year earlier the first quarter of China’s economy grew 6.4 percent that was assisted by the high factory production.

A senior forex strategist at Daiwa Securities said, “Short positions for the Aussie had piled up just yesterday on the dovish RBA, and now they appear to be reversed in haste following the Chinese data.”

Recently, the Reserve Bank of Australia’s dovish stance dragged the Australian dollar.

After the RBA said, if inflation stays low and unemployment trend surges, it believes a cut in interest rates would be “appropriate”.

The strategist stated, “While the RBA has sounded dovish, actually cutting rates is not a realistic option at the moment. This, in addition to higher iron ore prices, could propel the Aussie higher in the long term.”

After the Chinese data eased concerns about a global economic slowdown, the euro gained against the dollar which weakened often on a safe haven state.

Updates with the major currencies

Meanwhile, the dollar index against a basket of six major currencies slipped 0.1 percent to 96.976 and euro’s previous losses had been cut down, gaining 0.2 percent to $1.1300.

In a news report on Tuesday, as economic instability in China and trade tensions linger, several European Central Bank policymakers think the ECB’s economic projections are too optimistic, according to sources with direct knowledge of discussions.

In the earlier trade, the Aussie helped the New Zealand dollar retract and gain 0.5 percent at $0.6727 from its previous 3-1/2-month low of $0.6668

In the first quarter, New Zealand’s annual inflation data showed it kicked the kiwi raising chances of interest rate cuts in the upcoming months.

After the yen strengthened 112.17, its highest since Dec. 20, a bounce in U.S. yields to four-week highs happened, weakening the greenback at 111.98.