China’s trade balance for October, in Chinese yuan (CNY) terms, reached CNY 640.4 billion, narrowing from the previous figure of CNY 645.47 billion.
Exports fell 0.8% year/year in October against 8.4% in September. The country’s imports rose 1.4% year/year in the same period against 7.5% recorded previously.
In US dollar (USD) terms, China’s trade surplus grows less than expected in October.
The trade balance reached +90.07B against +95.60B expected and +90.45B previously.
Exports (Y/Y): 1.1% against expected 3.0% and 8.3% last.
Imports (Y/Y): 1.0% against expected 3.2% and 7.4% previously.
Market reaction to China’s trade balance
AUD/USD extends losses around 0.6473 in an immediate reaction to the Chinese trade data. The pair is down 0.09% on the day, at the time of writing.
Price for Australian dollar last 7 days
The table below shows the percentage change of the Australian Dollar (AUD) against major listed currencies over the last 7 days. The Australian dollar was the weakest against the Japanese yen.
0.25%0.25%-0.61%0.99%1.28%2.12%0.68%
-0.00%-0.87%0.75%1.01%1.87%0.43%
-0.84%0.75%1.00%1.88%0.43%
1.56%1.86%2.72%1.24%
0.22%1.13%-0.31%
0.85%-0.56%
-1.42%
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | ||||||||
| EUR | -0.25% | |||||||
| GBP | -0.25% | 0.00% | ||||||
| JPY | 0.61% | 0.87% | 0.84% | |||||
| CAD | -0.99% | -0.75% | -0.75% | -1.56% | ||||
| AUD | -1.28% | -1.01% | -1.00% | -1.86% | -0.22% | |||
| NZD | -2.12% | -1.87% | -1.88% | -2.72% | -1.13% | -0.85% | ||
| CHF | -0.68% | -0.43% | -0.43% | -1.24% | 0.31% | 0.56% | 1.42% |
The heat map shows percentage changes of major currencies in relation to each other. The base currency is selected from the left column, while the bid currency is selected from the top row. For example, if you select the Australian dollar from the left column and move along the horizontal line to the US dollar, the percentage change shown in the box will represent AUD (basis)/USD (quote).
This episode was published on Friday at 3:00 GMT as a preview of China’s trade balance data.
Overview of China’s trade balance
The customs administration publishes its data for October on Friday at 03:00 GMT. The trade balance is expected to expand to $95.60 billion. in October compared to $90.45 in the previous reading. Exports are expected to increase by 3%, while imports are expected to increase by 3.2%.
Since the Chinese economy has an impact on the global economy, this economic indicator will have an impact on the Forex market.
How could China’s trade balance affect AUD/USD?
AUD/USD traded positive on the day ahead of China’s trade balance data. The pair edged higher as the US dollar (USD) softened after data showed weakness in the US labor market, raising expectations for another rate cut this year.
Better-than-expected data could lift the Australian dollar (AUD), with the first upside barrier seen at the 100-day exponential moving average (EMA) at 0.6525. The next resistance level appears at the September 1 high of 0.6560, heading for the October 6 high of 0.6620.
On the downside, the October 10 low of 0.6472 will offer buyers some comfort. Extended losses could see a decline to the July 31 low of 0.6424, followed by the 0.6400 psychological level.
Frequently asked questions about the Australian dollar
One of the most important factors for the Australian dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country, another key factor is the price of its biggest export, iron ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and trade balance. Market sentiment – whether investors are taking on riskier assets (risk-on) or seeking safe havens (risk-off) – is also a factor, with risk positive for the AUD.
The Reserve Bank of Australia (RBA) influences the Australian dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This affects the level of interest in the economy as a whole. The main objective of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low ones. The RBA can also use quantitative easing and tightening to influence credit conditions, the former AUD negative and the latter AUD positive.
China is Australia’s largest trading partner, so the health of the Chinese economy has a major impact on the value of the Australian dollar (AUD). When the Chinese economy does well, it buys more raw materials, goods and services from Australia, lifting demand for the AUD and increasing its value. The opposite is the case when the Chinese economy does not grow as fast as expected. Positive or negative surprises in Chinese growth data therefore often have a direct impact on the Australian dollar and its pairs.
Iron ore is Australia’s largest export, accounting for $118 billion a year according to 2021 data, with China as its primary destination. The price of iron ore can therefore be a driver for the Australian dollar. Generally, if the price of iron ore rises, the AUD also rises as overall demand for the currency increases. The opposite is true if the price of iron ore falls. Higher iron ore prices also tend to result in a greater likelihood of a positive trade balance for Australia, which is also positive for the AUD.
The balance of trade, which is the difference between what a country earns from its exports compared to what it pays for its imports, is another factor that can affect the value of the Australian dollar. If Australia produces highly sought-after exports, then its currency will gain in value solely from the excess demand created from foreign buyers seeking to buy its exports over what it spends buying imports. Therefore, a positive net trade balance strengthens the AUD, with the opposite effect if the trade balance is negative.