Dollar Weaker On Chinese Slowdown

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March 20th, 2012

NEWS that the Chinese economy could be cooling faster than expected has kept the Australian dollar low.

At 1200 AEDT today, the local currency was trading at 105.02 US cents, down from 105.77 cents on Tuesday afternoon.

CMC foreign exchange dealer Tim Waterer said the dollar had reacted on Tuesday to commentary on Chinese iron ore demand and economic performance, but had fallen lower after a session of over-selling.

"The dollar has lost some ground during the morning session today. I suspect because it was a bit over-sold during the previous 24 hours,'' he said.

"The Australian dollar has a heightened sense of awareness in relation to any Chinese news, and certainly we saw commodity-bloc currencies overnight were shunned in favour of others.''

Yesterday, BHP Billiton iron ore president Ian Ashby said that China's iron ore demand was weakening, while Gu Xianghua - an executive of the China Association of Automobile Manufacturers - said vehicle deliveries would be unlikely to meet targets.

Mr Waterer said the local currency would likely move higher throughout the day.

"We've seen a few bargain-hunters step in this morning who have seen decent value in the Australian dollar,'' he said.

"This has seen it move back towards 105 (US cents).

"I expect it to move closer to 105.50 sooner rather than later.''

From 0700 AEDT, the Australian dollar has traded between 104.68 US cents and 105.02 cents.Meanwhile, Australian bond future prices were lower