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China’s RatingDog Services PMI climbs to 53 in August vs. 52.5 expected

China's Services Purchasing Managers' Index (PMI) unexpectedly rose to 53 in August from 52.6 in July, the latest data published by RatingDog showed on Wednesday.

The data came in above the market forecast of 52.5 in the reported period.

AUD/USD reaction to China’s Services PMI

The Chinese proxy, the Australian Dollar (AUD), remains firmer following the upbeat data, with AUD/USD adding 0.12% on the day to 0.6523 as of writing.

Australian Dollar Price Today

The table below shows the percentage change of Australian Dollar (AUD) against listed major currencies today. Australian Dollar was the strongest against the Japanese Yen.

USDEURGBPJPYCADAUDNZDCHF
USD0.09%0.17%0.34%0.06%-0.03%0.15%0.13%
EUR-0.09%0.08%0.28%-0.04%-0.26%0.05%0.03%
GBP-0.17%-0.08%0.16%-0.11%-0.33%-0.02%-0.04%
JPY-0.34%-0.28%-0.16%-0.30%-0.48%-0.30%-0.22%
CAD-0.06%0.04%0.11%0.30%-0.18%0.08%0.07%
AUD0.03%0.26%0.33%0.48%0.18%0.14%0.29%
NZD-0.15%-0.05%0.02%0.30%-0.08%-0.14%-0.02%
CHF-0.13%-0.03%0.04%0.22%-0.07%-0.29%0.02%

The heat map shows percentage changes of major currencies against each other. The base currency is picked from the left column, while the quote currency is picked from the top row. For example, if you pick the Australian Dollar from the left column and move along the horizontal line to the US Dollar, the percentage change displayed in the box will represent AUD (base)/USD (quote).


This section was published on Tuesday at 23:45 GMT as a preview of China's Caixin Services PMI.

Chinese Caixin Services PMI Overview

China’s Caixin Services Purchasing Managers Index (PMI) for August is due early during Wednesday’s Asian market hours, slated to release at 01:45 GMT. China’s currency exchange rate is controlled against the US Dollar (USD), but notable economic changes within China’s economy can have significant impacts on Australia as well, with the Australian Dollar (AUD) frequently serving as a proxy for investor sentiment in China.

China’s latest Caixin Services PMI is expected to tick down to 52.5 in August from the previous month’s 52.6. Economic data from China tends to see a high amount of government control exerted on the internal figures, resulting in publications that markets generally view as dubious. However, changes in month-to-month figures can give investors an idea of how the Chinese government views its own success in controlling its own economy.

How could it affect AUD/USD?

With Australia’s economy closely to tied to China, shifts in Chinese economic data tend to have an outsized impact on AUD/USD. The Australian Dollar (AUD) took a hard hit on Tuesday, falling one-half of one percent against the US Dollar (USD) amid broad-market safe haven flows.

An upside surprise in Chinese Caixin PMI figures could be enough to galvanize risk appetite during Wednesday’s Asian market session, while a downside beat will confirm for many investors that ongoing tariff fallout from US President Donald Trump’s trade war with everybody at once is reaching deeper into the Chinese economy.

Australian Dollar FAQs

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.

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.

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.

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.

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

Joshua Gibson

Joshua joins the FXStreet team as an Economics and Finance double major from Vancouver Island University with twelve years' experience as an independent trader focusing on technical analysis.

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