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Singdollar remains stronger than Australian dollar; hits 4-month high

Singdollar remains stronger than Australian dollar; hits 4-month high

Australian dollars are seen in an illustration photo Feb 8, 2018. (Photo:Reuters/Daniel Munoz)

SINGAPORE: Good news for Singaporeans going on holiday to Australia, as the Singapore dollar hit a 4-month high against the Australian dollar this week.

The Singdollar traded at an intraday high of 1.0525 against the Australian dollar on Thursday (May 9). It rose to an intraday high of 1.0553 against the Australian dollar on Monday, the highest since it touched 1.0795 against the Australian dollar on Jan 3 this year.

The weakening Australian currency comes amid heightening US-China trade tensions. Analysts said the fear of a trade war was posing the biggest drag on the Australian currency in the near-term, with a rate cut by Australia's central bank no longer expected this year.

READ: Asian markets enjoy much-needed rally but tariffs tensions reign

"Our base case scenario is for China and the US to have a trade deal still within the quarter and that has the propensity to lift the AUD via the sentiment channel, as well as reducing expectations for a rate cut by RBA (Reserve Bank of Australia)," said Maybank analysts in a report on Thursday.

China is Australia's single largest export market so anything that might dim the outlook for Chinese trade is taken as a negative for the Aussie.

The Australian dollar came under pressure on Thursday as US President Donald Trump kept up a war of words with China over trade, threatening to impose additional tariffs on Chinese goods from Friday.

Beijing announced it would retaliate if tariffs rise.

READ: First day of US-China trade talks end; Trump's tariff hike set to take effect

However, Australia's exports to China have shown little signs of suffering in the past few months, with exports in March up 21 per cent on the same time last year, helped by high prices for iron ore.

"If the US government applies a blanket 25 per cent tariff rate on all of Chinese exports to the US, we estimate the direct economic hit to Chinese GDP would be around 0.4 per cent," said Joseph Capurso, a senior currency strategist at CBA.

"A hit of this magnitude can be easily offset with fiscal and/or monetary policy easing," he added. "We do not expect a material impact on the Chinese, US or Australian economies."

Source: CNA/agencies/nc

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