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Australian dollar resilient to trade risks

The Australian dollar took only a brief knock when Washington made good on past threats and announced tariffs on $US200 billion of Chinese imports, with the risks so well flagged that losses were fleeting.

The Aussie dollar was back up at 71.88 US cents, having initially slipped as deep as 71.44.

It remained some way above recent lows at 70.85.

Speculators are structurally short of the currency having sold for weeks in anticipation of an escalation in the Sino-US trade dispute.

The Reserve Bank of Australia (RBA) used minutes of its September policy meeting to warn that protectionism was a "material risk" to an otherwise upbeat outlook for the global and local economies.

The bank also welcomed the "modest" decline in the Aussie, saying it would help support economic growth.

While policy makers remained optimistic on the economic outlook overall, they still saw no reason to raise interest rates given slack wages growth and low inflation.

"If we are right in thinking that the economy won't live up to the RBA's hopes, then a rate hike may still be two years away," said Paul Dales, head of Australian economics at Capital Economics.

"This will prompt the Australian dollar to weaken from $0.71 now to $0.65 next year."

Austrlaian Associated PressBack to Breaking News

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