AUD/USD Hanging onto 0.88 after China Growth

Australia’s dollar rose from a 3 1/2-year low after data showed growth in China, the nation’s biggest trading partner, was better than economists forecast.

A decline in Australia’s 10-year (GACGB10) bond yield, which touched an 11-week low, was limited after reports indicated gains last month in Chinese industrial production and retail sales were close to analyst expectations. New Zealand’s currency briefly extended losses after an earthquake shook the capital city of Wellington. The gap between Australia and New Zealand’s two-year swap rates widened on Jan. 17 to the most in five years ahead of inflation reports for both countries.

“Leading into the data, the market was clearly short the Aussie,” said Jonathan Cavenagh, a Singapore-based foreign-exchange strategist at Westpac Banking Corp, referring to bets the Australian dollar would decline. “Given the Chinese data was not as bad as what some in the market were fearing, then we’ve seen a subsequent position squeeze.”


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