On 8 August 2023, a POUND STERLING LIVE'S online news article "Australian Dollar Slips to New 2023 Low on News Chinese Imports from Australia Slumped 10% in July" reported the following: "China reported a 12.4% year-on-year decrease in imports, down on June's 6.8% drop, and below analyst expectations for a reading of -5.6%. It was reported that China's imports from Australia fell a sizeable 10.9% in July, helping explain Tuesday's slide in the Aussie currency. The latest trade figures suggest the downturn in the world's second-largest economy continued into mid-year amidst a slump in global demand for its goods. Chinese exports fell 14.5% y/y in July, after dropping 12.4% in June, the consensus was -13.2%. "Chinese exports declined at a faster rate in July, in an indication of waning global demand," says Duncan Wrigley, Chief China Economist at Pantheon Macroeconomics. .... The Australian-U.S. Dollar exchange rate meanwhile fell 0.70% to 0.6527 which puts the pair near a major support line (0.65), which if broken could result in a decline to the 2022 lows located near 0.64. .... The trade statistics showed the import values of iron ore - Australia's main export earner - fell at doubledigit rates even as volumes remained relatively well supported, suggesting strong global supply. China is Australia's most important trading partner and a key source of foreign exchange earnings, ensuring the Australian Dollar is often considered a proxy for expressing sentiment towards China"

Using the demand-supply model of exchange rate determination (including a proper demandsupply figure), explain why the news of poor trade data from China would lead to an immediate depreciation of the Australian dollar.

Answer rating: 100% (QA)

Depreciation of the Australian Dollar due to Poor Chinese Trade Data A DemandSupply Analysis The news of Chinas slumping imports particularly from Aus... View the full answer