Australia seeks clarification on China coal import 'block'

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The New Zealand dollar fell, dragged down by the Australian dollar, amid concerns about what a ban on Australian coal imports through China's northern ports in Dalian might mean.

The Dalian Port Group announced through Reuters that it was banning coal imports from Australia, and also introducing a total cap on coal imports at 12 million tons for 2019.

The affected ports also comprise only 1.8% of Australian coal exports.

"We believe and understand that these are simple import quotas, consistent with the likes that China has applied before, that China continues to apply and that apply equally to all countries", he said.

Australia's New Hope Coal declined to comment.

"I would not jump to the conclusion that it is something directed towards Australia".

Australia exported around 36 megatonnes metallurgical to China a year ago, (representing) 20 per cent of Australia's total exports'.

"If it were to be the sign of a deterioration in the underlying political relationship between Australia and China, that would be much more concerning".

He said the trading relationship between Australia and China remains as strong as it's been in the past.

Investors eyed signs of progress in the latest round of trade negotiations between the USA and China amid expectations President Donald Trump will meet Chinese President Xi Jinping next month to strike a deal.

Just before the start of the Lunar New Year holidays, Chinese customs officials told some local authorities to start controlling shipments from Australia, without giving explicit instructions as to how or why, according to a person with knowledge of the order, who asked not be identified because they're not authorized to speak publicly.

"This seems to be an escalation of what is already happening between China and Australia".

"China's Customs assesses the safety and quality of imported coal, analyses possible risks, and conducts corresponding examination and inspection compliant with laws and regulations", Foreign Ministry spokesman Geng Shuang said.

In the currency market, the Australian dollar was in the spotlight after Australia added more full-time employment in January as expected.

Reserve Bank of Australia governor Philip Lowe chimed in by saying the amount of coal involved was relatively small and not enough to derail the Australian economy.

The pair is short-term bearish, according to the 4 hours chart, now developing below all of its moving averages and with the 20 SMA accelerating south below the larger ones, all of them over 80 pips above the current level.

But Wood Mackenzie highlights the hazards for China in taking longer term or more far-reaching moves to restrict Australian coal.

Meanwhile, China's demonstration of muscle flex places pressure on the Australian government - giving it a taste of what could happen if China did something more meaningful to damage our trade relationship.

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