Australian Dollar (AUD) Fluctuates after Chinese Data, RBA Comments, AUD/USD Softer

During the Australasian session the ‘Aussie’ put on a mixed performance against the US Dollar as a number of factors affected demand for the South Pacific currency. Initially, the Australian Dollar fell below the 0.76 level in response to less-than-impressive economic reports from China and Australia. China’s industrial production report showed a 6.8% annual increase in the year to date. This was down from 8.3% in February and considerably less than the 7.7% expected by economists. Chinese retail sales, meanwhile, had been forecast to print at 11.6% on the year in February but actually came in at 10.7%. As China is Australia’s main trading partner, these signs of weakness took a toll on demand for the Australian Dollar.

The commodity-driven currency was also left trading in a softer position as domestic home loans data showed a sharper-than-forecast declination in January. The -3.5% drop exceeded estimates for a -2.0% decline. Additionally, Australian investment lending fell by -0.1% in January following December’s 6.4% gain and the value of loans dropped by -1.0% on the month. However, the Australian Dollar was able to recoup 0.2% against the US Dollar to trade in the region of 0.7639 on the strength of comments issued by RBA Assistant Governor Christopher Kent. According to Kent, a ‘very low level of interest rates is expected to sustain strong economic activity in the housing market and support household wealth [and] support for household consumption.’

Before the weekend a further flurry of Australian Dollar exchange rate movement is likely to occur following the publication of Australia’s employment figures for February. The nation is expected to have added 15,000 positions in February after losing -12,200 positions in January. This would keep the unemployment rate at 6.4%. However, an unexpectedly strong result could give the ‘Aussie’ a boost. Investors will also be focusing on Australia’s Consumer Inflation Expectation report and looking ahead to the US Advance Retail Sales figure. A rebound in US consumer spending may prevent the Australian Dollar to US Dollar currency pair returning to above the 77 cents level.