China key to Australian dollar

Financial and commodity markets analytics

The Australian dollar has surged today against it’s US counterpart in today’s trading session as expectations grow that the Australian economy may be one of the first to completely recover from the devastating effects of the coronavirus which lent some solid support to the local currency.
Some states, such as South Australia have reported several weeks with no new coronavirus infections and the states that still report cases have noted there are very few infections which means Australia is shaping up to be one of the first countries to become virus free which would be a huge psychological boost for the local economy and may lead to some major investments from abroad.
Although the coronavirus started in China, the country has somehow (If you believe the media) managed to also more or less contain the virus and in some cities begun business as usual which is just what the doctor ordered for the Australian economy.
As economic momentum builds up in China the logical conclusion is that it will filter down to Australia as the Asian powerhouse is the country’s biggest trading partner and in particular the price of commodities such as Iron ore, Australia’s biggest export is likely to receive a boost.
The price is currently sitting around $83 a tonne and is sitting at around the same price as it was before the coronavirus hit which delivers nice profits to the Australian miners who extract it from the ground at around $15 a tonne.
All this positive news creates a great opportunity for the Australian dollar to strengthen further in the months ahead and a lot will depend on whether the country has actually contained the coronavirus and whether there will be a 2nd round of infections once the situation dies down.
It will also depend largely on the continued recovery of the Chinese economy which will ensure a constant demand for the Australia’s commodities and keep the demand strong for the Aussie dollar.