Australian dollar may not have much to gain from the US-China deal. Is that the case?

In the coming weeks, the economic growth in China is likely to slow down, but that does not mean that it will not be sustained. As the economic performance in China slows down, it is likely that the investors who have already invested in China are not willing to abandon the trade of the Chinese Yuan. The Chinese government wants to encourage economic growth, but at the same time, it wants to ensure that investors do not get pressured by the economic performance of the Chinese economy.

Chinese government is giving two certain amount of money to the government of Australia to help the government of Australia to buy goods. The amount of money given by the Chinese government is equal to the Australian Government’s fiscal deficit. In this way, the Australian dollar does not get stressed out as the economic growth slows down.

If the economic performance of the Chinese economy continues on the same level as it has been so far, then the value of the Australian dollar will not change much at all. The Chinese government would prefer to receive the monetary advantage as it is doing, without having to compensate the Australian government for the stimulus package that it is giving.

The Australian dollar is not like other currencies in that it is not sensitive about the performance of the Chinese economy. The Australian dollar would be affected positively or negatively depending on the economic growth in China. This is what the Chinese government is trying to avoid.

This would mean that if the Chinese economy is not going to expand much further, then the Australian government has to pay even more for the commodities that are purchased in Australia. In that case, the currency of Australia will not keep in constant relation to the one of China.

In that case, the two dollar could suffer a lot. At that point, the Australian dollar would have become overvalued, which is what the Australian government is trying to avoid. China is not going to give up and allow its currency to be overvalued.

That means that if the Australian economy continues to be dependent on China for its growth, the two dollar would face a trade imbalance. If the exchange rate between the Australian dollar and the Chinese currency was too high, then Chinese citizens would not be able to buy as much Australian currency in the black market.

The Australian dollar is not like other currencies in that it is not sensitive about the performance of the Chinese economy. The Australian dollar would be affected positively or negatively depending on the economic growth in China. This is what the Chinese government is trying to avoid.

In that case, the two dollar would face a trade imbalance. If the exchange rate between the Australian dollar and the Chinese currency was too high, then Chinese citizens would not be able to buy as much Australian currency in the black market. When this happens, there is a problem in terms of one currency to another.

That means that the two dollar would be overvalued. It is possible that the two dollar can be overvalued at a level which would give the Australian dollar a market value lower than the international value of the two dollar.