Aussie Ended The Year With A Bang; China Might Get in the Way

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As the Australian dollar finishes 2022 strong, the country stays vigilant on its largest trading partner’s developments.

China has started to open their doors to tourists eliminating the quarantine policy upon arrival. The country thought it was high time to lower 6its guards as being overprotective has created some adverse ripple effects on their economy.

Together with this, the Australian dollar has experienced a rise before the year 2023 enters. AUD/USD is trading at 0.6801 in the European session, up 0.37% on December 30.

The final week of the year falls between calm weather and a relatively low economic calendar due to Christmas and New Year’s Day. The Australian dollar, however, managed to launch a year-ending rally, rising by approximately 2% since December 23.

Despite the excellent performance of the Aussie currency, it still has been watching China very closely. When we speak long-term, the country will eventually regain its economy because of untightening restrictions.

We know the ease in shipments and tourism has already been brought to the table. However, the country now has experienced another adverse effect due to the said decision.

A lot of workers are sick due to the surge of CoVid-19. Businesses and people indoors are affected, leading to decreased manufacturing production. 

The hasty and chaotic reopening will probably cause the GDP to decline in the first quarter of 2023. However, HSBC anticipates a recovery in China’s economy, with a 5% growth in 2023.

According to Action Forex, “Australia is watching these developments closely. China is Australia’s largest trading partner, and how well China’s economy performs can have a strong impact on the direction of the Australian dollar. If China’s economy contracts in Q1, Australian exports will suffer, and the Australian dollar could be in for a bumpy start to the year.”

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