AUD/USD advances as China embarks on economic reforms

Australian dollar traded on positive territory against its US counterpart on Monday, after China unveiled the largest economic reforms since the 1990s, which underscored a positive outlook for Australian exports towards worlds second largest economy.

AUD/USD climbed to a session high at 0.9414 at 8:20 GMT, after which consolidation followed at 0.9404, rising 0.35% for the day. Support was likely to be received at November 11th low, 0.9345, while resistance was to be encountered at November 8th high, 0.9480.

Riskier currencies, such as the Aussie, received a boost, as the Shanghai Composite Index of stocks gained 2.1% and was poised for the highest close since October.

At the same time, China will allow more private investments in state-controlled sectors of the economy, while couples in the country will be allowed to have two children, in case either parent is an only child, according to a decision by the Communist Party on November 15th.

It also became clear that the average value of new homes in 70 Chinese cities has reached a new record high in October, with demand in the sector remaining stable. In annual terms, home prices in the country rose for a ninth consecutive month in October. Home prices advanced in 69 out of 70 surveyed cities throughout the country in October, or the same tendency as a month ago.

The yield on Australian 10-year government bonds were little changed at 4.21%, after having climbed seven basis points, or 0.07 percentage point, last week.

Traders saw a 23% probability that the Reserve Bank of Australia (RBA) will cut its benchmark interest rate from the current record low level of 2.50% by April next year. RBA is expected to release the minutes of its most recent policy meeting on Tuesday, which would reveal whether a rate cut scenario was on the horizon.

Meanwhile, after its earlier advance on Friday, US dollar pared gains on the day, after it became evident that the Empire State manufacturing index dropped to a reading of -2.21 in November, marking its first negative value since May. In October the index came in at 1.52. Preliminary estimates pointed an increase to 5.00.

In addition, industrial output in the United States was reported to have unexpectedly decreased 0.1% in October compared to September, marking its first monthly drop since July, as sectors of mining and utility services contracted. Expectations pointed a 0.2% expansion in production during October.

Elsewhere, the Aussie was higher against the euro, with EUR/AUD cross losing 0.34% on a daily basis to trade at 1.4350 at 7:59 GMT. AUD/NZD pair was steady, dipping 0.04% to trade at 1.1241 at 8:01 GMT.