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AUD/USD: Aussie slides to more than 4-year low as Chinese trade figures disappoint

H.S. Borji
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The Australian dollar declined against its US counterpart Monday, hitting a more than four-year low as strong US employment data and disappointing Chinese trade figures added more pressure on the currency.

The AUDUSD slumped to an intraday low of 0.8269, the lowest level since June 2010. The pair would subsequently consolidate at 0.8308, declining 0.15 percent. The pair faces initial support at 0.8298 and resistance at 0.8318, according to the daily chart.

Growing appetite for the US dollar and a shaky domestic recovery have weighed heavily on the Australian dollar in the second half of the year. The Aussie, as the Australian currency is known, has declined nearly 12 percent since the beginning of July when it was trading north of 94 US cents.

The US dollar received another boost Friday when the Labor Department said employers added 321,000 nonfarm payrolls in November, the biggest single-month gain since January 2012. The October reading was revised upward to reflect a 243,000 gain. When factoring in revised data, the US economy has added more than 200,000 workers for ten consecutive months, the longest stretch since the 1994.

Even more encouraging were the wage figures, which suggested average earnings were finally responding to the rising payroll numbers. Average hourly earnings rose 0.4 percent in November, double the rate of forecasts, following a meager 0.1 percent gain in October. That was the biggest monthly gain in more than a year.

Weak Chinese trade figures added more pressure on the Australian dollar Monday. Chinese imports declined unexpectedly in November, a sign the world’s second-largest economy was cooling.

Chinese imports plunged 6.7 percent in the 12 months to November, Beijing reported today. That followed a 4.6 percent annual increase in October and was well below the median estimate calling for a 3.9 percent gain.

Exports increased just 4.7 percent annually, down from the 11.6 percent growth rate of the previous month. Economists forecast an increase of 8.2 percent in November.

Declining imports helped strengthen China’s trade balance in November. Beijing’s surplus surged more than 61 percent to US $54.47 billion, a new record high.

China’s economy grew just 7.3 percent annually in the third quarter, the slowest rate since the height of the Great Recession in early 2009 and slightly below the government target of around 7.5 percent.

A weaker local currency is a welcomed sign for the Reserve Bank of Australia, which has repeatedly cautioned the value of the Australian dollar was too high. Central bankers are relying on a weaker currency to help revive the economy, which is recovering from a downturn in natural resource investment, plummeting commodity prices and a slowdown in Chinese demand.

The RBA kept its key interest rate on hold last week for the sixteenth consecutive meeting. 2014 marked the first calendar year in a decade the RBA made no changes to interest rates, as policymakers continue to seek stability to support the sagging economy. The central bank won’t rush to raise interest rates and could even wait until 2016 to begin normalizing policy, according to market analysts.

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