-Xu Gao, chief economist with Everbright Securities Co.
After a 5-day rally last week, the Aussie lost most of its earlier made gains on profit taking and disappointing data from the world's second largest economy. The AUD/USD pair left the 94 area and traded 0.31% lower on Friday, fluctuating around 0.9372 at the time of writing. Last week, Australian currency received a strong support from the nation's employment data and weaker American currency, which was dragged lower by dovish FOMC minutes.
While the currency can be considered as an overbought and trader will close their positions, weak data from Australia's biggest trading partner, China, added to concerns that the growth will be muted. The resource-rich economy exports to China mostly iron ore, coal and liquefied natural gas. Shipments to the Celestial country helped Australia to escape the worst effects of the global financial crisis over the past several years. Many of Australian mining companies are heavily dependent on demand from China, hence, any pickup in Chinese growth can boost weakening key mining sector.
Chinese inflation rose 2.4% in March, accelerating from 2% in February, however, still staying below the official target of 3.5% and missing analysts' expectations for a 2.5% growth. The main reason for weak inflation was a 2.3% drop in producer prices. The latest data reinforced the view that the People's Bank of China will add fresh stimulus soon.
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