China's Commerce Ministry says US measures on Chinese chips are bullying, protectionist

Lallalit Srijandorn FXStreet

China’s Commerce Ministry said early Wednesday that US measures on China’s advanced chips are ‘typical of unilateral bullying and protectionism.’ Chinese authorities urged the US to immediately correct its erroneous practices.

Key quotes

US measures on China’s advanced chips are ‘typical of unilateral bullying and protectionism.’
US chip measures seriously undermine the stability of the global semiconductor industry chain and supply chain.
US abuses export controls to contain and suppress China, violating international law and basic norms.
Suspects that US measures constitute discriminatory, restrictive measures against Chinese companies.
Any organization or individual that implements or assists in the implementation of US measures shall bear corresponding legal liabilities.
Urges the US to immediately correct its erroneous practices.
Urges the US to abide by international economic and trade rules and respect other countries’ rights to scientific and technological development.

Market reaction

At the time of writing, the AUD/USD pair is trading 0.21% higher on the day to trade at 0.6438.

Australian Dollar FAQs

What key factors drive the Australian Dollar?

One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD.

How do the decisions of the Reserve Bank of Australia impact the Australian Dollar?

The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive.

How does the health of the Chinese Economy impact the Australian Dollar?

China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.

How does the price of Iron Ore impact the Australian Dollar?

Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.

How does the Trade Balance impact the Australian Dollar?

The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

Author

Lallalit Srijandorn

FXStreet

Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.

GBP/USD bounces back above 1.3200 despite political drama in UK

GBP/USD extends the rebound above 1.3200 in the second half of the day on Friday but the pair is still down more than 1% for the week. Stronger-than-expected UK Retail Sales data seem to be helping the British Pound limit its losses, while the chaotic UK political environment keeps the bulls at bay.

EUR/USD looks consolidative around 1.1460

EUR/USD stages a modest rebound after slipping to a three-month low below 1.1420 at the end of the week. That said, the pair now looks to consolidate humble gains just above 1.1460 despite growing uncertainty surrounding the next round of US-Iran negotiations, which keeps the US Dollar’s downside contained.

Gold remains below $4,200, looks to post weekly losses

Gold struggles to gather recovery momentum and trades below $4,200 in the American session on Friday, pressured by the hawkish Fed tone and the renewed uncertainty surrounding the next round of US-Iran talks. Despite the bullish action seen in the first half of the week, XAU/USD remains on track to close in negative territory.

Solana extends correction despite ETF inflows, RWA adoption

Solana (SOL) price edges below $70 extending its losses for the fourth straight day this week. The institutional demand for Solana is building, with steady inflows so far this week and Morgan Stanley’s amended S-1 filing for a Solana-focused Exchange-Traded Fund.

The Iran war didn't break the US economy, but what happens next?

Nearly four months after the start of the Iran war, the US economy remains remarkably resilient. While the conflict initially triggered a severe disruption to global energy markets and a sharp rise in Oil prices, recent diplomatic progress between Washington and Tehran has eased concerns about a prolonged supply shock.

Regime change: Inside Kevin Warsh's first move to make the Fed unreadable on purpose

The rate did not move. That was the least interesting thing about Kevin Warsh's first meeting in charge of the Fed. The FOMC held its benchmark at 3.50%-3.75% for the fourth straight meeting, exactly as priced, and then the new chair used his first press conference to dismantle the machinery the market has leaned on for a decade.