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CURRENCIES

Australian dollar hit as China rejects coal imports

London

THE Australian dollar fell on Tuesday after reports that China has halted coal imports from the country as their relations deteriorate, while the US dollar recovered from a three-week low plumbed the day before.

The US dollar index against a basket of currencies edged up 0.1 per cent to 93.18 after Chinese authorities appeared to be trying to put a brake on recent rises in the yuan, one of the basket's components. It remained close to the three-week low of 93 it fell to on Monday.

Against the euro, the dollar rose 0.2 per cent at 1.1788.

News that a Johnson & Johnson Covid-19 study was paused due to an unexplained illness in a participant contributed to a modest dollar rise.

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The fact that investor sentiment in Germany fell by more than expected in October failed to leave a mark on the euro.

The US currency's safe-haven appeal was limited by growing expectations former US vice president Joe Biden's win in the Nov 3 presidential election would bring large stimulus for the pandemic-hit economy, bolstering the stock market and investor risk appetite.

The Australian dollar was last down by 0.3 per cent at 0.7194 against the US dollar as coal, the country's key export commodity, came under threat. It also fell 0.3 per cent against the New Zealand dollar.

State-owned utilities and steel mills in China received notice from China's customs to stop importing Australian thermal and coking coal. Analysts, however, said both the country and its currency should weather the storm.

Kerry Craig, global market strategist at JP Morgan Asset Management, noted that it is easier to find another supplier for thermal coal than it is for coking coal, making it difficult to substitute Australian coking coal.

"There is still a clear symbiotic relationship between the two nations in as much as Australia is still reliant on exports to China and China is reliant on the higher-quality coal and iron ore from Australia while it rebuilds its economy," he said.

Kit Juckes, macro strategist at Societe Generale, said the Aussie dollar should also remain supported by Australia's strong fiscal stimulus.

Deutsche Bank analysts found that Israel, Singapore and Australia would be the biggest beneficiaries from the announcement of a vaccine.

The Chinese yuan rose 0.1 per cent at 6.7328 per US dollar in the offshore market. REUTERS

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