Trade Balance Pushes Down Australian Dollar

The Australian Dollar (

) fell this morning against the US Dollar (

) and most of the other major currencies after the trade balance for February showed an unexpected deficit instead of a solid surplus. Chinese interest rate hike and RBA rate decision also weighed down on the Aussie. The miss on the trade balance was indeed terrible, as it showed a deficit of 205 million against the expectations for a surplus of 1.2 billion. At the same time, the Reserve Bank of Australia held the interest rates steady at 4.75% at their meeting. The decision was highly expected and priced in already, and was accompanied with basically the same statement since the last rate hike in November, saying that the inflation is well under control despite the boom in commodities as the consumer spending and borrowing still remains somewhat weak. Basically, everything in the statement showed that there is no reason to expect a rate hike anytime soon. Another negative news for the Aussie was the decision of the Chinese central bank to hike the rates for another 0.25%, for the second time this year, as the Chinese monetary authorities continue to fight overheating and inflation. The slower potential growth in China will mean less demand for Australian commodities, and, subsequently less demand for its currency. As a result, AUD/USD fell further from its recent multi-year highs, sliding from 1.0370 all the way to 1.2870, although it recovered during the last hour and is currently struggling to hold the 1.03 level, which does not seem very likely at the moment. The Australian currency is trading lower against the Japanese Yen (

) and the Euro (EUR) too, as the AUD/JPY fell from 87.20 to 86.70s, and the EUR/AUD moved higher from 1.3715 to 1.3760.