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Aussie dollar gains again on China tariff news
THE Australian dollar rose for a fourth straight day on Thursday and the Chinese yuan gained after Beijing unexpectedly said it would reduce tariffs on some US imports, fuelling demand for riskier assets.
China said on Thursday it would halve tariffs on some US imports, bolstering hopes that the global economy will avoid a major shock from a coronavirus outbreak. It also said it hoped to work with the United States to eliminate all tariff increases in future.
That came with investors already beginning to emerge from safe-haven assets and bet on the virus being a short-term shock, even as the human toll continued to grow.
The number of deaths from the disease rose by 75 on Thursday, almost all of them in China, and media reports this week of a treatment proved to be premature.
Elsa Lignos, global head of FX strategy at RBC Capital Markets said: "Though yesterday's coronavirus vaccine stories were premature, markets have extended the risk-on tone overnight, this time on news that China will halve tariffs."
Moreover, though infections stood at more than 28,000, she noted that Thursday was the first day in over a week that new-case numbers appeared to be stabilising in China.
Chinese authorities have also pumped in billion of dollars into money markets this week in an effort to restore calm; they have also pledged more support for the economy.
Against the US dollar, the Aussie advanced 0.1 per cent to US$0.6765. The Chinese yuan was trading at 6.9702 yuan per dollar, after weakening to 7 per dollar on Monday.
The US dollar gained 0.1 per cent to US$1.2985 per pound. It was trading just below a two-month high against the euro at US$1.0996.
"This is a market that was just wanting to go higher. It just needed a reason," said Chris Weston, head of research at Melbourne brokerage Pepperstone.
"It's like a Jack-in-the-box, with a lid that is just waiting to spring," he said.
Though that is not to say caution is absent. Many risk-sensitive assets are still trading at substantial discounts to their prices of a few weeks ago.
Oil prices are rising, but the recovery is much slower than the sell-down as the size of the expected hit to demand grows.
Broader market volatility fell to new lows, with one-month implied euro-dollar price swings dropping to a record low of 3.7 per cent this week. REUTERS