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Aussie climbs as China considers buying unsold homes

May 15, 2024

Key points:

  • China’s proposal to buy unsold homes lifts AUD/USD as the country attempts to support its struggling property market.
  • This move is also positively affecting other major currencies like EUR, NZD, GBP, and CAD against the USD.

China is contemplating a policy move where local governments would purchase millions of unsold homes.

This initiative aims to stabilise the distressed real estate sector, which has seen home sales plummet by nearly 50%, leaving a vast inventory of unoccupied properties.

Australian dollar rises on optimism

Chart displaying AUD/USD exchange rate climbing to 0.66450 with a trend of 0.34%, following news that China is considering buying unsold homes. The chart features moving averages (MA) and MACD indicators, reflecting market reactions to the potential economic boost. Image hosted by VT Markets, a forex brokerage.

Picture: The AUD/USD pair is moving upwards. Download the VT Markets app.

The Australian Dollar (AUD) is responding positively to this news, as the AUD/USD pair experiences upward movement.

The strengthening of the AUD is partly due to Australia’s economic ties with China, particularly in the real estate and resource sectors, which might see increased demand if China’s housing market stabilises.

Yuan strengthens on promise of a stable real estate market

Similarly, the Chinese Yuan is also gaining strength from this prospective policy shift. A stabilisation in the real estate market could ease some of the financial strains and potentially encourage more domestic spending and investment in construction and related industries.

Also read: China Manufacturing Due for Review, More US PMI Data

Other major currencies, including the Euro (EUR), New Zealand Dollar (NZD), British Pound (GBP), and Canadian Dollar (CAD), are showing gains against the U.S. Dollar (USD) as well. The global currency market is reacting to the potential increase in Chinese purchasing power and a possible boost in economic activity stemming from this policy.

China mulls debt increase to support property sector

The proposal, while still preliminary, could mean a significant increase in public sector debt for China as it would involve substantial financial outlay.

However, the immediate effect of the news has been to provide a lifeline of hope to property sector firms within China, potentially averting further decline in this critical sector of the economy.

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As market participants monitor the developments of this proposal, the reaction in currency markets highlights the interconnectedness of global economies and the impact of significant policy moves on international trade and currency values. For traders, this underscores the importance of staying informed and agile in CFD trading to take advantage of market movements.

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