These are the currencies most vulnerable to China’s economic slowdown

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The Australian dollar has also been hit hard this year, pummeled by twin concerns of its own economy and that of China.

It has been on a downward spiral since 2018, going from levels as high as $0.7918 last February, to around the $0.70 level this week.

That slide was compounded by a February report that China had placed bans on Australian coal imports at a major port. Market speculation suggests Thursday’s report may be a reflection of strains in the political and trade relationship between Australia and China in recent times.

Last year, Australia banned Chinese telecommunication companies Huawei and ZTE from selling 5G technology equipment in the country, citing national security concerns.

The weakening Australian dollar “appears to have reflected concerns about China’s growth and increased protectionism,” said Capital Economics.

That currency is most at risk among commodity-linked currencies, as it follows the “general trend of global risk appetite” more than its domestic economy, Ahmad said.

Only a trade deal between the U.S. and China — who have been embroiled in a tariff battle since 2018 — could save those at-risk currencies, experts said.

“Admittedly, a trade deal between China and the US could give the Australian and New Zealand dollars a lift … Nonetheless, we think that any further rally would prove short-lived and be overshadowed by the economic slowdown in China,” said Capital Economics.

Ahmad added: “In terms of potential catalysts to watch out for and what holds the keys to triggering a potential rally in these currencies, if I had to pick one it would be the removal of US-China trade tensions.”

“These currencies will remain vulnerable to sudden shifts in direction for as long as the political landscape in the global context remains subject to sudden changes,” Ahmad noted.

Source: CNBC

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