Moody’s just cut China on debt concerns and a cautious outlook for growth or, put differently, Moody’s downgrades China on the same concerns everyone has been shouting about for at least three years.
Aussie is down, so’s the offshore yuan:
- China Cut to A1 From Aa3 by Moody’s, Outlook to Stable
- Reflects expectation that China’s financial strength will erode somewhat over the coming years, with economy-wide debt continuing to rise as potential growth slows, Moody’s says.
- Government’s direct debt burden to rise gradually towards 40% of GDP by 2018, closer to 45% by the end of the decade, Moody’s says
- Growth potential to decline to close to 5% over the next five years, Moody’s says
- Outlook to stable from negative by Moody’s
“AUDUSD was chased lower on electronic platforms by clients in immediate reaction to Moody’s downgrade of China to A1 from Aa3,” an Asia-based FX trader told Bloomberg, adding that “intraday positioning was still light before the announcement but speculative clients are already well short [and] investors are ’picking on’ the Aussie because of the relatively good liquidity as well as the macro implications.”