Australian Dollar Up on Trade Data; Report on China's Spending Plans

 
   By James Glynn 
 

        SYDNEY--The Australian dollar climbed in Asia Tuesday, helped by news of a smaller-than-expected trade deficit in November and reports that China plans to accelerate US$1.1 trillion in infrastructure spending.
        At 0520 GMT, the Australian dollar was changing hands at US$0.8131, up from US$0.8062 late Monday.
        According to a report by Bloomberg News, citing unnamed people familiar with the matter, China is accelerating 300 infrastructure projects this year to support growth.
        Latest data showed Australia's seasonally adjusted trade deficit widened to A$0.93 billion from a revised A$0.88 billion in October, according to the Australian Bureau of Statistics. It was the eighth trade deficit in a row. Economists had been expecting a shortfall of A$1.6 billion in November.
        "The Australian trade data helped a little, especially given that it shows a significantly lower trade deficit so far in the fourth quarter relative to the third quarter, which will help boost growth," said David Forrester, currency strategist at Macquarie Bank, based in Singapore.
        But the report on China's infrastructure plans, which could boost demand for Australian exports such as iron ore, extended the Australian currency's rise.
        "While this announcement simply brings forward already scheduled spending and so is not new spending, the market reads the announcement as an increase in the potential for new fiscal spending down the road," he added.
        Mr. Forrester said he doesn't expect China to rely too much on infrastructure spending to lift growth, which supports Macquarie Bank's forecast that the Australian dollar will fall in 2015 toward US$0.7800.
        Sue Trinh, currency strategist at RBC Capital Markets, said reports on accelerated spending in China need to be viewed as a sign the economy is facing a tough 2015.
        "The bringing forward of planned infrastructure spending should be seen in the context of an economy that is slowing more quickly than expected," she said.
        Write to James Glynn at james.glynn@wsj.com
        (END) Dow Jones Newswires

        January 06, 2015 00:51 ET (05:51 GMT)

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