China’s Trade Balance: Surplus expands in August on slowing Imports
China's Trade Balance for August, in Chinese Yuan (CNY) terms, arrived at CNY732.7 billion, widening from the previous figure of CNY705.18 billion.
Exports rose 4.8% YoY in August vs. 8% in July. The country’s imports advanced 1.7% YoY in the same period vs. 4.8% recorded previously.
In US Dollar (USD) terms, China’s Trade Surplus expanded more than expected in August.
Trade Balance arrived at +102.33B versus +99.2B expected and +98.24B prior.
Exports (YoY): 4.4% vs. 5% expected and 7.2% last.
Imports (YoY): 1.3% vs. 3% expected and 4.1% previous.
Meanwhile, China's August Trade Surplus with the United States (US) came in at $20.3B in August, down from $23.7B in July.
FX implications
AUD/USD extends gains above 0.6550, underpinned by the Chinese trade data. The pair is up 0.10% on the day, 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 British Pound.
| USD | EUR | GBP | JPY | CAD | AUD | NZD | CHF | |
|---|---|---|---|---|---|---|---|---|
| USD | -0.01% | 0.02% | -0.09% | -0.01% | -0.13% | -0.07% | -0.04% | |
| EUR | 0.00% | 0.01% | -0.02% | -0.01% | -0.11% | -0.02% | -0.04% | |
| GBP | -0.02% | -0.01% | -0.12% | -0.03% | -0.13% | -0.04% | -0.06% | |
| JPY | 0.09% | 0.02% | 0.12% | 0.02% | -0.06% | -0.13% | 0.08% | |
| CAD | 0.00% | 0.00% | 0.03% | -0.02% | -0.02% | -0.01% | -0.04% | |
| AUD | 0.13% | 0.11% | 0.13% | 0.06% | 0.02% | 0.09% | 0.07% | |
| NZD | 0.07% | 0.02% | 0.04% | 0.13% | 0.01% | -0.09% | -0.01% | |
| CHF | 0.04% | 0.04% | 0.06% | -0.08% | 0.04% | -0.07% | 0.01% |
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 Monday at 1:55 GMT as a preview of China's Trade Balance data.
China’s Trade Balance Overview
The General Administration of Customs will publish its data for August on Monday at 03.00 GMT. Trade balance is expected to widen to $99.2B in August, compared to $98.23B in the previous reading. Exports are expected to climb by 5.0%, while Imports are projected to rise by 3.0%.
As the Chinese economy has influence on the global economy, this economic indicator would have an impact on the Forex market.
How could the China’s Trade Balance affect AUD/USD?
AUD/USD trades on a positive note on the day in the lead up to the China’s Trade Balance data. The pair gains ground as the US Dollar weakens amid rising expectations of the Federal Reserve (Fed) interest rate cut later this month.
If data comes in better than expected, it could lift the Australian Dollar (AUD), with the first upside barrier seen at the July 10 high of 0.6591. The next resistance level emerges at the July 24 high of 0.6625. To the downside, the September 5 low of 0.6513 will offer some comfort to buyers. Extended losses could see a drop to the 100-day Exponential Moving Average (EMA) at 0.6585. The next contention level is located at the June 20 low of 0.6448.
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
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.
