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- AUD/USD shrugged off negative China trade news on Friday to hit fresh monthly highs.
- Excellent Australian containment of the Covid-19 pandemic is likely supporting the currency alongside NZD.
AUD/USD looks set to end the week on the front foot and at its highest levels since early September of just below 0.7400. On the day, the pair is up 30 pips or 0.4%.
AUD shrugs of China trade woes
Friday’s Asia session saw a few negative updates regarding Australian and Chinese trade relations. Firstly, China is reportedly set to hit Australian wine with tariffs that could double, or even triple its price for Chinese consumers, making the category of product “unviable” for Australian exporters, according to Australian Trade Minister Simon Birmingham.
The Chinese Ministry of Commerce said that its investigation started back in August, had found that Australia was “dumping” wine in China and had delt substantial damage to domestic Chinese producers of wine. Australia has of course criticised the decision.
Friday’s new tariffs on wine are the latest in a list of Chinese trade actions being taken against Australia, which many see as China’s way of “bullying” Australia into backing down from its call to have an independent investigation into the origins of Covid-19.
Despite the fact that China makes up fully 37% of all Australian wine exports, worth more than $800M per year, AUD has been completely unfazed. Instead, the currency opted to track a weakening USD by hitting fresh monthly highs just under 0.7400.
Supporting AUD, and seemingly outweighing the above mentioned negative China trade relations news, has been further evidence of excellent containment of the pandemic in Australia. Indeed, this week Victoria was declared virus-free after having no new cases reported for 28 days.
Given how well Australia and New Zealand have contained the pandemic, perhaps it is not surprising to see AUD and NZD as by far the best two performing currencies on the month.
AUD/USD key levels