SYDNEY: Australia’s currency is heading for a two-month high, even as iron ore, its biggest export commodity, hovers near decade lows.
The Australian dollar rose as much as 1.3% to $0.7337 against the U.S. dollar early Wednesday, its strongest level since mid-October. The gains preceded Australia’s surprisingly strong third-quarter growth report showing the economy accelerated 2.5% on year.
Australia’s economy typically moves in lockstep with the iron-ore market: booming when prices are high and stumbling when they fall. Australia has struggled to diversify its economy after a decadelong mining boom faded, cutting interest rates twice earlier this year to boost growth.
China’s sputtering demand has sent a chill through commodity markets in recent months. On Tuesday, iron ore tumbled 2.8% to $41.60 a ton, according to The Steel Index, a fresh near-decade low.
Now, bets are mounting that Australia, which has dodged recession since 1991, is resilient enough to withstand China’s slowdown.
Central bank officials have been sanguine about economic growth in recent comments. On Tuesday, the central bank held interest rates steady at 2% citing a “moderate expansion in the economy…in the face of a large decline in capital spending in the mining sector.”
