$A hit by China’s ratings downgrade

(Australian Associated Press)

The Australian dollar has fallen after a ratings downgrade on China renewed concerns about the economic strength of Australia’s key trading partner.

Moody’s Investors Service has downgraded China’s long-term credit rating to A1 from Aa3, reflecting its view that China’s financial strength will weaken in the coming years as economy-wide debt rises and potential growth slows.

The Australian dollar lost almost a third of a US cent to 74.55 US cents on the news, but has recovered some ground to be at 74.64 US cents at 1200 AEST.

Westpac senior currency strategist Sean Callow said the downgrade has renewed concern about the strength of China’s economy, though he does not expect it will hurt the Australian dollar in the long term.

“Because Australia is so tightly linked to China in terms of its exports then any threat to China’s growth outlook is a negative for Australia,” he said.

“We’ve seen a knee-jerk reaction in the Aussie to Moody’s report and while it’s a talking point, it isn’t a game changer for China or Australia.”

The share market was slightly higher at 1200 AEST, with the benchmark S&P ASX200 index up 0.1 per cent.

A weaker gold price weighed on gold miners, with Newcrest Mining down three per cent at $20.77, while iron ore miner Fortescue was another poor performer, down 3.9 per cent at $5.055.

The major banks were relatively steady, and large healthcare stocks were stronger, with CSL up 1.2 per cent at $132.62 and Cochlear up 1.1 per cent at $144.48.

ON THE ASX:

* The benchmark S&P/ASX200 was up 7.4 points, or 0.13 per cent, to 5,767.6 points.

* The broader All Ordinaries index was up 6.6 points, or 0.11 per cent, to 5,809.4 points.

* The June SPI200 futures contract was up 4 points, or 0.07 per cent, at 5,775 points.

* National turnover was 858 million securities traded worth $2.1 billion.

CURRENCY SNAPSHOT AT 1200 AEST:

One Australian dollar buys:

* 74.64 US cents, from 74.94 US cents on Tuesday

* 83.45 Japanese yen, from 83.19 yen

* 66.72 euro cents, from 66.75 euro cents

* 57.56 British pence, from 57.81 pence

* 106.41 New Zealand cents, from 106.63 NZ cents

BOND SNAPSHOT AT 1200 AEST:

* CGS 4.50 per cent April 2020, 1.713pct, from 1.699pct on Tuesday

* CGS 4.75pct April 2027, 2.484pct, from 2.4464pct

Sydney Futures Exchange prices:

* June 2017 10-year bond futures contract at 97.485 (implying a yield of 2.515pct), from 97.525 (2.475pct) on Tuesday

* June 2017 3-year bond futures contract at 98.24 (1.76pct), from 98.25 (1.75pct).

(*Currency closes taken at 1700 AEST previous local session, bond market closes taken at 1630 AEST previous local session)

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