Liao Min, Vice Minister of the Ministry of Finance, said on Monday that China will strengthen countercyclical adjustments in macro policy to promote economic recovery in the fourth quarter, which will help achieve the annual growth target of about 5% this year. He said he would build a strong foundation for the future.
main quote
China to strengthen anti-cyclical fiscal policy.
China is confident of achieving its growth target of around 5%.
The details of fiscal spending will be determined through legal procedures.
It will be announced after the National People’s Congress session.
market reaction
At the time of writing, AUD/USD was down 0.12% on the day at 0.6598.
Australian Dollar Frequently Asked Questions
One of the most important factors for the Australian dollar (AUD) is the interest rate level set by the Reserve Bank of Australia (RBA). Australia is a resource-rich country, so another important factor is the price of its largest export, iron ore, which is Australia’s largest trading partner, as well as its inflation, growth rate and trade. The health of China’s economy is also a factor. balance. Market sentiment is also a factor, with investors taking on riskier assets (risk-on) or seeking safer assets (risk-off), with risk-on being positive for the Australian dollar.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates at which Australian banks can lend to each other. This affects the level of interest rates throughout the economy. The RBA’s main goal is to maintain a stable inflation rate of 2-3% by adjusting interest rates up and down. The Australian dollar is supported by relatively high interest rates compared to other major central banks, and conversely by relatively low interest rates. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former being AUD-negative and the latter AUD-positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a significant impact on the value of the Australian dollar (AUD). When China’s economy does well, China buys more raw materials, goods and services from Australia, increasing demand for the Australian dollar and boosting its value. The opposite is true if China’s economy is not growing as fast as expected. Therefore, positive or negative surprises in China’s growth data often directly impact the Australian dollar and its pairs.
Iron ore is Australia’s largest export, accounting for $118 billion annually, according to 2021 data, with China the main destination. Therefore, iron ore prices could be a driver for the Australian dollar. Generally, when the price of iron ore rises, the Australian dollar also rises because aggregate demand for the currency increases. The opposite is true if the price of iron ore falls. Higher iron ore prices tend to increase the likelihood of Australia’s trade balance being positive, which is also positive for the Australian dollar.
The balance of trade is the difference between what a country earns from exports and what it pays for imports, and is another factor that can affect the value of the Australian dollar. If Australia produces a highly sought-after export, the country’s currency will be deducted from just the surplus demand generated from foreign buyers seeking to buy that export, compared to the amount spent on purchasing the import. value increases. Therefore, a positive net trade balance will cause the Australian dollar to appreciate, while a negative trade balance will have the opposite effect.
