China, the second largest economy in the world, is currently suffering an economic slowdown. Market experts say some currencies that will take the most impact include the Australian dollar and the New Zealand dollar.
Impact on the Aussie and Kiwi
Australia and New Zealand are both commodity-producing countries. China is their biggest trading partner with 29.4 percent of New Zealand exports and about a third of Australian exports going to the Asian giant.
Australia, the largest exporter of iron ore, will suffer the largest declines given that China is the top consumer of iron ore.
Research firm Capital Economics said, “we expect the largest falls to occur in the Australian and New Zealand dollars. This is due to their exposure to China’s economy, which we forecast to continue to slow”.
Additionally, the firm said that a further decline in China’s economy will send demand for commodities lower, hence, commodity price. A fall in commodity prices leads to a lower amount of money paid for a country’s exports, which depreciates the country’s currency.
From 6.8 in 2017, China experienced its slowest growth in 28 years last year with a 6.6 percent reading.
Other Currencies at Risk
Forex broker FXTM’s currency strategy head Jameel Ahmad said the Canadian dollar and the Russian dollar could also feel the pressure. Asian currencies such as the Malaysian ringgit, Indonesian rupiah, and the Singapore dollar could experience weakness as well.
Ahmad added that the removal of US-China trade tensions holds the key to triggering a potential rally in these currencies.
Bottomline
China’s influence on the global economy has been on display for quite a long time now. If the country’s economy continues to slow down, the above-mentioned currencies could experience further declines. If trade tentions between the US and China were to escalate, it could also damage Asia’s growth prospects.
