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The Australian Dollar Falls On The Back Of Continued Concerns Over China


  • Australia is a supermarket for the Chinese.
  • Trade weighed on the Australian dollar in 2018 and 2019.
  • Coronavirus is the new problem.
  • Australia has a compelling book value.
  • FXA moves higher and lower with the Australian dollar vs. the U.S. dollar currency pair.
  • Looking for more stock ideas like this one? Get them exclusively at Hecht Commodity Report. Get started today »

I was born in Brooklyn, N.Y., in 1959. Aside from a few years in the UK, I have spent my entire life in the United States of America. My younger brother took a different path. After graduating from college, he left the US on a journey that took him down under, to the land of wonder.

For over three and one-half decades, my brother has lived and raised his family in Australia. My sister-in-law, niece, and two nephews are Australians, and my brother has been a citizen of the nation for decades. I have visited Australia several times, and while the trip is long and torturous, it truly is the land of wonder.

Australia is rich in natural resources, from minerals and energy to the agricultural products that feed people around the globe. Australia has a massive landmass, but a small population. The close geographical location to China, the world's most populous country, makes it a supermarket for the Chinese. As China is Australia's leading customer, its economy follows the Asian nation. Economic travails in China over recent years has weighed on the value of the Australian dollar versus the US currency. The Invesco Currency Shares Australian Dollar Trust product (NYSEARCA:FXA) replicates the price action in the A$ versus the US dollar currency pair.

Australia is a supermarket for the Chinese

Mineral-rich Australia exports iron ores and concentrates, coal, natural gas, gold, aluminum ores, beef, and a host of other commodities. In 2019, Australia's top trading partner was the world's most populous nation, China.

Source: Australia's Top Trading Partners

As the chart shows, exports to China dwarfs the level of Australian goods flowing to other counties around the world. China accounted for around one-third of all shipments by dollar value in 2019.

Trade weighed on the Australian dollar in 2018

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This article was written by

Andrew Hecht profile picture

Andrew Hecht is a 35-year Wall Street veteran covering commodities and precious metals.

He runs the investing group The Hecht Commodity Report, one of the most comprehensive commodities services available. It covers the market movements of 20 different commodities and provides bullish, bearish and neutral calls; directional trading recommendations, and actionable ideas for traders. Learn more.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

The author always has positions in commodities markets in futures, options, ETF/ETN products, and commodity equities. These long and short positions tend to change on an intraday basis.

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Comments (2)

With China being such a huge part of the Aussie economy, what happens if China's " house of cards" debt levels start to collapse because of the Corona virus impact on the economy and other countries pulling supply chain factories out of China? Also, Australia has ridiculous energy prices and a very heavy regulatory environment that stifles any new business. Holden?? Too bad, The Aussie people are the best.
Interesting, thank you.

L/T I'm bullish of A$ (and C$) as 'commodity' currencies - based on the premise that we'll see high inflation as Govts start the printing presses in earnest. Before then, especially with the Covid-19 hype I believe there's a risk of recession, so commodities and trade thereof could decline further.
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