Aussie dollar surges to 11-week high vs USD as trade surplus balloons to record curbing recession fears

The rising surplus is expected to aid a 0.2-0.4% expansion in GDP, and hence revive hopes of rating upgrade and curb the fears of technical recession.

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Australian dollar denominations shown in a photo illustration at a currency exchange in Sydney, Australia Reuters

The Aussie dollar jumped to a 11-week high against the US currency on Thursday as data showed the country's trade surplus has widened to its largest ever in December, reviving hopes of rating upgrade and curbing fears of technical recession.

The Australian Bureau of Statistics said on Thursday said that the trade balance of the country was a surplus of a record A$3.51 billion in December, way above market expectations of A$2.2 billion. It made a 72% jump from the November surplus.

AUD/USD jumped 0.94% on the day to 0.76540, its highest since 10 November, and it is up 1.4% so far in the week. In January, the Aussie had risen more than 5% against the greenback, reversing a three-month streak of losses.

Against the New Zealand dollar, the Aussie had fallen to a 4-month low earlier this week, but with the gains since Wednesday has helped a remarkable rebound.

AUD/NZD jumped 0.6% on the day to as much as 1.04793, and distancing further from Tuesday's multi-month low of 1.03250.

The Aussie dollar strengthened 0.8% to 1.4095/euro from the previous close of 1.4203. To the British pound, the AUD rallied 0.81% on the day to 1.6560.

National Australia Bank economist Tapas Strickland was reported as saying that the bumper trade surplus should eliminate any fears that Australia was at risk of recording a 'technical recession' after the weak third-quarter GDP figures.

A "technical recession" is when GDP contracts for two quarters in a row. The Australian economy had contracted 0.5% in the third quarter of 2016 after rising 0.6% in the previous quarter. Analysts said the December surplus is capable of adding as much as 0.2-0.4% to the GDP

The December surplus is expected to sharply narrow down the fourth quarter deficit which will prompt rating agencies to revise the country's rating back to AAA status.

"The current account deficit is the mirror image of our borrowing from the rest of the world. The implication is that our reliance on the savings of the rest of the world should decline. "These developments should feed into the debate about the sustainability of Australia's AAA rating in a positive way," an article in SMH has quoted the CBA chief economist Michael Blythe.

In seasonally adjusted terms, goods and services credits rose 5% to A$32.63 billion and goods and services imports rose 1% or A$0.21 billion to A$29.12 billion.

Australia December trade surplus
Australia December trade surplus
Australia Q3 GDP
Australia Q3 2016 GDP