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Australian Dollar Ticks Lower on Shock China FDI Miss

Australian Dollar Ticks Lower on Shock China FDI Miss

David Cottle, Analyst


Talking Points:

  • The Australian Dollar ticked lower following some weakness in Chinese investment data
  • Foreign direct investment fell 9.2% on-year in January, much further than expected
  • However, the Chinese commerce ministry has pinned much weakness on comparison effects

The Australian Dollar slipped on Thursday, but not by much, after the release of some seriously weak Chinese investment figures.

Foreign direct investment (FDI) into China fell by 9.2% in January, compared with the same month a year ago, according to official figures. It fell to CNY80 billion, or $11.68 billion. The markets had been looking for a rise of 1.4%, after December’s 5.7% increase.

The Chinese commerce ministry said the fall was mainly due to a high base of comparison with last year, and with the timing of the long Lunar New Year holiday break. That was relatively early this year and so will have affected the figures earlier, too. It also pointed out that non-financial outward-bound investment fell 35.7%, with investment in overseas property down 84.3%.

It’s probably no coincidence that China has offered more favorable terms to potential foreign investors just this week, in line with a plan first mooted in January. A package of measures is on the table, including preferential land prices for certain manufacturing investors and investment in previously restricted sectors.

The Australian Dollar often acts as the markets’ liquid China proxy but seems to have been reluctant to do so after these latest data. AUD/USD has risen this week thanks to a run of surprisingly strong Australian consumer and business confidence survey. However the bulls didn’t want to take it much higher on Thursday despite a consensus-beating official labor-market report. Likewise, the bears didn’t maul the Aussie after this Chinese miss. AUD/USD slipped, but only as far as 0.77140 from 0.77180 just before the data.

Down, but not far: AUD/USD

Chart Compiled Using TradingView

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--- Written by David Cottle, DailyFX Research

Contact and follow David on Twitter: @DavidCottleFX

DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.