The Australian dollar gained on its US counterpart today. The currency slid against other rivals intraday but is has bounced by now. Yesterday, the Aussie dropped more than 1% following China’s credit rating downgrade by Standard & Poor’s.
S&P announced yesterday:
S&P Global Ratings lowered the long-term sovereign credit ratings on China to ‘A+’ from ‘AA-‘ and the short-term rating to ‘A-1’ from ‘A-1+’. The outlook on the long-term rating is stable.
The rating agency explained its decision by excessive accumulation of credit by China:
China’s prolonged period of strong credit growth has increased its economic and financial risks.
Australia’s economy strongly depends on exports of raw materials, particularly iron ore, to China, therefore the Australian currency is vulnerable to bad news from the Asian country.
AUD/USD rallied from 0.7927 to 0.7974 as of 10:08 GMT today. AUD/JPY opened at 89.19, fell to 88.46 intraday, but has bounced later, and is trading near the opening level right now.
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