The Australian dollar extended its early Asian session rally in late trading on Tuesday as China’s industrial production and retail sales grew more than economists had expected in August.
Solid economic data from China boosts demand for raw materials from Australia as China is Australia’s biggest trading partner and the key export destination for its mining rich industry.
China’s industrial production climbed to 10.4 percent year-over-year in August following the 9.7 percent growth recorded in July. Economists expected the production to grow 9.9 percent.
Retail sales rose 13.4 percent year-over-year in August, improving from the previous month’s growth rate of 13.2 percent. This was also better than the 13.3 percent increase expected by economists.
Fixed asset investment rose 20.3 percent in the January-August period compared with the same period last year. This was slightly higher than the 20.2 percent increase expected. In the first seven months of the year, investment showed a 20.1 percent growth on an annual basis.
The Australian dollar has been a clear outperformer since China registered upbeat trade data and benign inflation numbers in the week-end.
Last week’s softer than expected U.S. jobs and the Liberal National coalition’s victory in domestic elections that offered hopes for an end to taxes on carbon emissions and mining also lifted the Australian dollar.
In economic news, confidence among Australian businesses strengthened considerably in August, with the National Australia Bank’s business confidence index rising to 6 in August from -3 in July, its highest level in more than two years.
Credit card spending in New Zealand for retail transactions rose a seasonally adjusted 0.8 percent on month in August, Statistics New Zealand said today. This beat expectations for an increase of 0.6 percent following the 0.4 percent gain in July.
Elsewhere, an index measuring the activity of tertiary industry in Japan was down a seasonally adjusted 0.4 percent in July at 99.9. That beat forecasts for a contraction of 0.5 percent, which would have been unchanged from the June reading following a downward revision from the -0.3 percent originally reported.
According to the minutes of the Bank of Japan’s policy board meeting held on August 7 and 8, members of the bank’s board believe that the Japanese economy is beginning to see a moderate recovery.
At the meeting, the BoJ decided to keep its monetary easing program unchanged, as the economy has begun to recover moderately and inflation data has turned positive. The bank retained its plan to increase the monetary base at an annual pace of JPY 60 to 70 trillion, also holding interest rates at the record low of 0.10 percent.
The Australian dollar climbed to 92.52 against the yen around 1:30 am ET, its highest level since July 24, and 0.9290 against the US dollar, a level not seen since July 26. The next key resistance levels for the aussie are seen at 0.9310 against the greenback and its 100-day simple moving average of 93.20 against the yen.
The Australian dollar rose back above the key 0.96 level against the Canadian dollar for the first time in 5 days, reaching 0.9621 around 1:30 am ET. The aussie challenged yesterday’s peak against the New Zealand dollar and was trading at 1.1530. The next bullish hurdles for the aussie are 0.9640 against the loonie and 1.16 against the kiwi.
The Australian currency advanced to a 4-day high of 1.4283 against the euro, staying above the 1.43 level for the second consecutive day. A reversal of the EUR/AUD pair from a double-top formation above the 1.50 resistance on August 28 suggests that the aussie could re-attempt to claim the level.The 1.42 level is seen as as immediate resistance for the aussie.