Australian dollar hits lowest level in 10 years
Published on 03.01.2019 15:24

The Australian dollar briefly hit its lowest level in 10 years after disappointing data out of China confirmed fears that the trade wars currently going on Between China and the US are doing serious damage to the economy.

The Caixin and PMI indices out of China fell heavily during yesterday’s trading session and some predict that this may be the start of a worrying trend as the year unfolds

Both the Caixin and official manufacturing PMIs for China declined, continuing the downward trend that has been in place since mid-2018," noted analysts from Capital Economics.

"We think that China's economy will slow further this year, given the headwinds from a cooling property market and slower credit growth." They added.

The real damage to the Australian dollar was done after a letter by Apple CEO Tim Cook was released where he painted a dire picture of the Chinese economy which has hit sales of Apple products hard and is bound to filter through to other industries.

“China’s economy began to slow in the second half of 2018. The government-reported GDP growth during the September quarter was the second lowest in the last 25 years. We believe the economic environment in China has been further impacted by rising trade tensions with the United States”.Mr Cook said.

“As the climate of mounting uncertainty weighed on financial markets, the effects appeared to reach consumers as well, with traffic to our retail stores and our channel partners in China declining as the quarter progressed,” he added.

A damming report on the state of the real estate market also added to the woes of the Australian dollar with the overall market falling by 5 percent in Australia last year and in some parts of Sydney and Melbourne the figure was closer to 10 percent which is a stark turnaround from the previous year.

This may force the Reserve Bank of Australia to slash interest rates this year to stop further falls but this will only accelerate the demise of the Aussie dollar.


Andrew Masters

Analyst

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