China Slowdown Sinks Aussie Dollar

If investor appetite for Aussie denominated products declines rapidly that will strain the 30% of mortgage funding sourced from foreign capital. China Pulling Rug From Under the Aussie

But that is all changing, even faster than expected. China is no longer the economic power house it once was with recent data suggesting a gradual slowdown is far from assured.

At the same time, the recent strength of the Australian dollar is taking its toll. The Australian economy is now starting to suffer and high interest rates, that have made the currency attractive, could soon be a thing of the past. Fears that China will not achieve a soft landing have risen sharply over the last few weeks with industrial activity contracting faster than forecast and with inflation pressures failing to subside.

The impact this is having on corporate China is now starting to show. According to Morgan Stanley, the country’s largest metal producers reported an 18% decline in net income. Overall, corporate profits in February fell by a massive 5.2%.