The Aussie and the Chinese Yuan amid the slow economic growth in
China
There is an interrelated relation between China and Australia known as “Sino Australian
relation as they are engaged economically. Today China
is Australia
largest trading partner. Therefore any negative Chinese economic data will have
negative impacts on the volatility of the Aussie.
Yesterday
Feb 25, 2014 the Aussie eased after the sharp fall of Chinese Yuan.Also On
Tuesday, the Australian dollar dropped below 0.90 level following the falling of
the Chinese Yuan due to slowdown economy in China, which retreated from 7.8% in
the third quarter to 7.7% (YoY) in the fourth quarter.
Furthermore,
in the previous week, a survey showed that China’s manufacturing activity at
seven-month low as economic growth in China slowdown and recent indicators have
showed weakness, particularly purchasing-managers indexes (PMI), which fall
from 49.5 in January to 48.3 in February, the lowest since July. And it raised investors concerns about fragility
in China's
huge manufacturing industry.
On the
other hand, European stocks slipped from a six-year high , while the Japanese yen
strengthened on concern a weakening in China’s yean will hurt growth. The Yuan weakened 0.5 percent, the lowest level
since November 2010, and the Shanghai
Composite Index decreased 2 percent.
Another reason of
economic slowdown is that banks in China have reduced real-estate
loans, signaling slower demand growth from the world’s second largest economy.
All
the above stated Chinese economic factors have affected the Australian dollar
which was trading lower against its US
counterpart on Monday, following its first weekly loss in four weeks, after the
decrease of New Homes in China,
as Australia’s
largest export market.
For this reason, the growing worries of the investors provoked
an aversion from investing in the Chinese market as well as most other emerging
markets, and they preferred to invest in Precious metals and to buy the
Japanese yen as a safe haven currency.
