AUD/USD – FDI in China widely anticipated

on Aug 20, 2013

**, Tuesday 20 August:**

US Redbook Retail Sales for last week reported decelerating growth from the prior 0.4 percent to 0.2 percent.
The Melbourne Institute Leading Index for June m/m will be reported at 01.30 BST tomorrow. The previous announcement indicated a rise of 0.2 percent.
At 03:00 BST tomorrow the Chinese Conference Board Leading Index for July m/m will be released. The prior reading showed 1.0 percent growth.

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The Australian dollar will also want to factor in the year-to-date Foreign Direct Investment (FDI) in China due out later today or tomorrow. The data has a tentative date range as the Commerce Ministry does not have an exact release schedule. Since April 2011 Chinese FDI has been decelerating each month, reaching a drop of 7.3 percent this February. After staying in negative territory from February 2012 to March 2013, FDI in China has rebounded with three readings showing growth of slightly above 1 percent. However, the latest release indicated a 4.9 percent rise in foreign direct investment, still well below the 15 percent pace prevalent before the selloff in commodities and slowdown in emerging markets.

This scatter plot from Credit Suisse illustrates the non-financial credit growth versus the investment growth across various cases and periods. When credit considerably outpaces investment growth in the economy, a nation could be facing a deleveraging period similar to post-1980’s boom-time Japan or following the more recent bursting of the US housing bubble. The current Chinese rate of credit growth has significantly surpassed investment and analysts are hoping for a significant increase in FDI to fuel a sustainable economic revival.
At the start of the European session today the aussie found support around the 12-day low of 0.9027 and the pair is currently holding around 0.9097 or 0.18 percent lower for the day


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