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SYDNEY, May 6 (Reuters) - The Australian dollar AUD=D3 fell sharply after China planner said it would indefinitely suspend all activities under the China-Australia strategic economic dialogue mechanism.
Sino-Australia relations have deteriorated since Canberra called for an international inquiry into the origins of the coronavirus, with China responding by restricting or banning imports of Aussie goods including lobsters, wines, beef and coal.
The Aussie fell as low as 0.7701 on the news and was last down 0.5% at $0.7712 from Wednesday's $0.7747.
"Recently, some Australian Commonwealth Government officials launched a series of measures to disrupt the normal exchanges and cooperation between China and Australia out of Cold War mindset and ideological discrimination," China's state planning agency the National Development and Reform Commission (NDRC) said in a statement explaining the decision.
So far though, the trade reprisals have done little to hurt Australia's broader economy or its dollar as strong sales and prices of its No.1 export earner - iron ore - have continued unabated.
In fact, Australia has had an uninterrupted spate of trade surpluses since January 2018 led by huge demand for its iron ore and coal from China.
Analysts have said Australia's economy will be hit only if China halts purchases of iron ore, a key ingredient in steel-making, a highly unlikely scenario given its enormous spending on infrastructure development.
Last month, Australia cancelled two accords between Victoria state and China on the Belt and Road Initiative saying they were out of line with its foreign policy, which sees a "free and open Indo Pacific" as a key goal.
A Chinese foreign ministry spokesman responded by urging Australia to abandon its "Cold War mentality and ideological bias" and "immediately correct its mistakes and change course".
