The Australian dollar has fallen on concerns that Chinese demand for iron ore may weaken.
On Tuesday, the Australian dollar was trading at 105.77, down from 106.00 cents on Monday afternoon.
Easy Forex currency dealer Tony Darvall said the local currency dropped sharply after BHP Billiton said growth in Chinese demand for iron ore appears to be flattening out but that it remained confident in its future needs for the steel-making commodity.
Dismissing concerns about a slowdown in China’s economy, BHP Billiton Iron Ore president Ian Ashby said he was confident the Asian superpower would meet its five-year economic growth targets.
In recent years China’s steel industry has recorded double-digit growth but BHP Billiton warned it is likely to decline to single digits. “The market took this as further confirmation of the impact of the China slowing-down story,” Mr Darvall said.
“It’s not so much that it was Chinese news as it was Chinese news affecting an Australian company, and our largest company.
“The market sold pretty aggressively on it.”
Mr Darvall aid the local currency had risen earlier on Tuesday following the release of the minutes from the Reserve Bank of Australia’s March 6 board meeting.
The minutes indicated the RBA believed interest rates were at the right level to balance the effect of Australia’s surging resources sector against weaker industries such as manufacturing and retail.
Mr Darvall said the Australian dollar was likely to trade between 105 and 106 US cents heading into Wednesday.
“There is a bit of a push-pull going on, the US dollar is weak but there is a negative China story floating.”