Global Macro: Chinese Growth Stops Fall of Australian Dollar

NEW YORK (TheStreet) -- Chinese growth has helped put a bottom under the falling Australian dollar/Japanese yen currency pair.

On Monday it was reported that Chinese gross domestic product annual growth of 7.7% beat the forecast of 7.6%. The strong number out of China, a close trading partner with Australia, boosted sentiment for the Aussie dollar.

The Aussie dollar had come under pressure in recent weeks as the country reported a decrease of 22,600 jobs in December when a decrease of only 7,500 jobs was expected. Reserve Bank of Australia officials have stated that the domestic currency was overvalued, and the weak employment number reiterated that belief.

The Australian economy derives a majority of its export revenue from China. Weak Chinese manufacturing and services numbers earlier in the year brought the Aussie dollar lower.

The strong Chinese growth number improves the outlook for Australia. If the Chinese economy can continue to grow at a 7% rate or better over the next year, then demand for Australian exports should remain high. That would be bullish for Australian interest rates and the Aussie dollar.

An issue that could arise is increased Chinese money-market rates. Throughout 2013 spiking short-term rates meant it was more expensive for companies to borrow funds. The People's Bank of China intends to tighten policy over the next decade to slow investment and deter asset speculation, but short-term spikes in the money-market rate are bearish for investor confidence, and tend to cause global equity markets to sell off.

If you liked this article you might like

'Fast Money' Recap: Consider Airline and Bank Stocks, Avoid Twitter

Loomis Long U.S. Dollar, Sees Limited Opportunities in Eurozone Bonds

'Fast Money' Recap: Broader Market a Buy if Oil Prices Rebound

'Fast Money' Recap: Buy Bank Stocks if They Fall on Senate Commodities Report

'Fast Money' Recap: Will Housing Stocks Rally Into Year's End?