Sino-US trade spat delivers hit to Aussie

THE Australian dollar lost ground as the stalemate in Sino-US trade talks clouded the outlook for the Asian giant in its demand for resources.

The Aussie dollar slipped 0.4 per cent to US69.75¢ yesterday and ever closer to the recent four-month trough at US69.60¢.

China is a major buyer of commodities from Australia so any threat to its trade is considered a potential negative for the currency.

Investors also use the Aussie as a liquid proxy for China plays, in this case shorting it as well as the yuan.

Joseph Capurso, a senior currency strategist at CBA, noted that Washington was due to release a “Section 232” report into the national security implications of car imports this week, which could give US President Donald Trump more ammunition in his trade disputes.

“Global stock markets, and global growth-sensitive currencies such as AUD and NZD, may be hit by fears a ‘trade war’ will spread,” Mr Capurso said.

“Europe, Japan, Korea and Mexico are major exporters of cars to the US.”

The Aussie also faces domestic hurdles from data on wages and jobs due this week, where any sign of weakness would fuel wagers on a rate cut by the Reserve Bank of Australia.

The central bank last week emphasised that further improvement was needed in the labour market to bring unemployment down and lift inflation. Wage figures for the first quarter are due tomorrow and are forecast to show modest growth for the year.

The jobs report on Thursday is expected to show 14,000 net new hires in April, with the unemployment rate ticking up to 5.1 per cent.