Australian Dollar Drops on Weak Chinese Data and Trade War Fears

The  Australian dollar today declined against its US counterpart as  markets digested the  impact of  weak Chinese industrial profits data on  commodity-linked currencies such as  the  Aussie. The  Aussie’s decline was further compounded by  the  re-emergence of  Sino-US trade war fears based on  recent news regarding potential orders by  the  US government against Chinese companies.
The  AUD/USD currency pair today dropped from an  opening high of  0.7077 to  a  low of  0.7032 in  the  early European session.
The  Aussie’s decline was triggered by  the  release of  the  Chinese industrial profits data during the  Asian session, which recorded a  1.8% year-on-year contraction in  November, as  compared to  the  previous figure of  3.6% growth. The  weak Chinese data triggered a  massive selloff in  commodity-linked currencies such as  the  Aussie and  the  New Zealand dollar, which are major commodities exporters to  China. Interestingly, the  Chinese yuan did not post any declines following the  news, but actually rallied higher. A  news report that President Donald Trump was thinking of  barring American companies from using Huawei and  ZTE products also affected the  Aussie.
The  Aussie failed to  benefit from the  overnight rally in  Asian and  global equity markets as  well as  the  higher crude oil prices. The  greenback’s weakness in  the  early European session as  tracked by  the  US Dollar Index also had a  muted impact on  the  currency pair.
The  currency pair’s short-term performance is likely to  be driven by  market sentiment due to  thin holiday trading.
The  AUD/USD currency pair was trading at  0.7050 as  at  11:49 GMT having recovered from a  low of  0.7032. The  AUD/CHF pair was trading at  0.6989 having dropped from a  high of  0.7035.

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