Aussie dollar soars to 2-year high on cautious Fed, stronger-than-expected China GDP

The Australian dollar climbed nearly 2 per cent to US$0.7839, a level last seen on June 2015.
The Australian dollar climbed nearly 2 per cent to US$0.7839, a level last seen on June 2015. PHOTO: REUTERS

SYDNEY (REUTERS) - The Australian dollar soared to a two-year high on Monday (July 17) amid diminishing worries of aggressive monetary policy tightening by the US Federal Reserve and stronger-than-expected economic data from China, Australia's No 1 trading partner.

China reported second-quarter gross domestic product expanded 6.9 per cent on the year, driven by strong industrial output, exports, retail sales and investment.

The US dollar held near a 10-month low it hit on Friday after the release of dismal US inflation and retail sales data which raised bets the US central bank will be in less of a hurry to raise interest rates.

The Australian dollar climbed nearly 2 per cent to US$0.7839, a level last seen on June 2015, after breaching major chart resistance in the US$0.7700/7778 range. It was last at US$0.7812 with bulls targetting the 200-week moving average around US$0.8026.

The Aussie also strengthened against the Singapore dollar and was up 0.4 per cent to S$1.0704 at 1:30pm.

"China's GDP data is quite encouraging for Australia. That suggests continued demand for Australian goods, including tourism," said Craig James, Sydney-based chief economist at CommSec. "It is encouraging for global growth as well because China is the second largest economy on the planet."

The Aussie has been climbing tirelessly since last week following comments from the US Federal Reserve Chair Janet Yellen that sounded less hawkish than some had feared.

That sent a green light for risk-taking, boosting carry trades where investors favour high-yielding currencies such as the Aussie over safe haven assets.

"The talk over the weekend and today is around the moves in the AUD. It's on fire," said Chris Weston, Melbourne-based chief market strategist at IG Markets.