Slump in China’s Economy

China has the second largest economy in the world and a new data released on Thursday indicated that factories, mines, and workshops in China have slowed down work since July.

Because of this, the Australian dollar has reacted negatively showing weakness as well.

Friday data showed that the Aussie dollar is down 106 US cents compared to Thursday at 105.81 US cents.  Currency strategist Mike Jones of the Bank of New Zealand pinpointed that slump in the value of the dollar is caused by the industry’s weak numbers.

In an interview at Wellington, Jones said that the investors shall be looking at China this weekend as the People Bank of China (PBOC) is set to give interest rate cuts or “lower the reserve requirement ration (triple R)” for the commercial banks.

On Thursday, information showed that the inflation in China for July was low at 1.8 percent.  China’s central bank is looking to help stimulate the economy by the interest rate cuts.

According to Jones, the hope of the interest rate cuts impeded the further fall of the dollar.

However, compared to the US dollar, the Aussie dollar has claimed its eighth gain within the last nine weeks.  The Reserve Bank shall also issue a Statement on Monetary Policy this Friday.