Strong China 1Q GDP Sends Yuan, Euro, Aussie Higher
The dollar was broadly lower in early trading in Europe on Wednesday after China’s slightly faster-than-expected economic growth in the first quarter encouraged a new leg up in commodity currencies.
At 04:00 AM ET (0800 GMT), the dollar index, which measures the greenback against a basket of six major currencies, was flirting with a three-week low at 96.578, down 0.1% from late Tuesday in Europe.
Earlier, China’s statistics office had said gross domestic product grew 6.4% in the first quarter from a year earlier, a touch above the 6.3% expected. That was due to signs of a strong recovery in both industrial production and retail sales in March, suggesting that the two key pillars of China’s economy are both responding to government stimulus measures and now regaining momentum.
The Chinese yuan rose to a four-week high against the dollar after the news, but the biggest gainer was the AUD/USD pair, which rose 0.25% to its highest level since February, as traders priced in a more optimistic scenario for Chinese commodity demand.
Amy Yuan Zhuang, an analyst with Nordea Markets, said it’s still too early to call a turnaround in China, and said she expected the authorities to keep all the recent stimulus measures in place.
“A growth double dip is the last thing Beijing needs amid ongoing trade negotiations with the US and the upcoming 30-year anniversary of the Tiananmen Square protest,” she said.
The euro also rebounded after sliding on Tuesday and traded back above $1.1300 by the European morning. Sterling continued to drift as the parliamentary recess stopped any significant progress in the Brexit drama.
The dollar has, however, risen against both the yen and the kiwi. Bank of Japan Governor Haruhiko Kuroda told CNBC that he still sees potential to ease monetary policy further, while lower-than-expected inflation data emboldened those who think that the Reserve Bank of New Zealand’s next rate move will be downward.