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Aussie Tests 1.0400 on Fears Of China Bust

By Boris SchlossbergForexJan 31, 2013 06:16AM ET
Aussie Tests 1.0400 on Fears Of China Bust
By Boris Schlossberg   |  Jan 31, 2013 06:16AM ET
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S&P Suggests China at risk of investment bust.

The Aussie dipped below the 1.0400 level once again in Asian session trade today, after a report by the S&P suggested that China's investment boom will have to cool considerably in the foreseeable future. According to S&P economists, who've come up with a model to determine the vulnerability of economies to an investment led collapse, China ranks number one on the list.

The S&P methodology compares investment spending as a percentage of GDP to real GDP and adjusts the two measures in a way that makes it possible to rank fast- vs. slow-moving economies in terms of risk. China, with 40% of its GDP tied up in investment ranks the highest in terms of risk.

Although the S&P report indicates that such imbalances may lead to a an economic collapse, at the very least it suggests that China will have to rebalance its growth towards consumption in order to avoid a possible bust. The Aussie which has been the primary beneficiary of China's infrastructure boom as the supplier of key commodities immediately sold off on the news dropping to a low of 1.0380 in late Asian trade.

Fears over the slowdown of the great "China demand" trade have dogged Aussie since the start of the year and the pair has been relatively weak as a result of those concerns. For now it appears to have stabilized near the 1.0400 level and may consolidate around the figure for the rest of the day. However, if the pair breaks the 1.0380 lows in North American session it may tumble all the way to 1.0350 as the day proceeds.
Aussie Tests 1.0400 on Fears Of China Bust

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Aussie Tests 1.0400 on Fears Of China Bust

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