LONDON, April 17 — The Australian dollar rose to a two-month high today after Chinese economic growth beat forecasts and indicated to some investors that the worst is over for the global economy.
The Aussie's jump encouraged some traders who have been searching for direction recently after a lull in currency markets but the euro and dollar moved little, suggesting broader volatility remained subdued.
The currency has been dogged by a dovish Reserve Bank of Australia but it rose above US$0.72 for the first time since February 21, after data showed China's economy grew 6.4 percent in the first quarter.
The Australian dollar is sensitive to the economic fortunes of China, Australia's biggest trading partner.
“It is becoming very clear again this morning what really matters for the Australian dollar is China. The currency is up despite the fact that the RBA rate meeting caused negative sentiment yesterday,” said Esther Maria Reichelt, an FX strategist at Commerzbank in Frankfurt.
Yesterday, the Aussie took a brief hit after the RBA said it believes a cut in interest rates would be “appropriate” should inflation stay low and unemployment trend higher.
The US dollar, often a safe haven, sagged against the euro after the Chinese data eased concerns about a global economic slowdown.
The US dollar index against a basket of six major currencies dipped 0.2 per cent to 96.846.
The euro rose 0.4 per cent to US$1.1300, paring the previous day's losses.
The single currency came under pressure yesterday after Reuters quoted four sources with direct knowledge of discussions as saying several European Central Bank policymakers think the ECB's economic projections are too optimistic, as economic weakness in China and trade tensions lingers.
The New Zealand dollar was down 0.5 per cent at US$0.6727 but the Aussie's bounce helped it pull back from a 3-1/2-month low of US$0.6668 plumbed earlier in the session.
The kiwi was hit after data showed New Zealand's annual inflation slowed in the first quarter, which raised the odds of an interest rate cut in the coming months. — Reuters