Most of Asia closed higher on Wednesday even as tensions with North Korea escalated, while the Shanghai market was almost flat after China logged a surprise trade deficit.
China reported a trade deficit of $884 million, disappointing expectations of a $15.4 billion surplus, Reuters reported. Imports were strong, up 14.1 percent versus expectations of a 5.2 percent rise.
Increasing imports show Chinese domestic demand is improving, strongly benefiting the Australian economy because China is its largest trading partner. The Australian dollar/U.S. dollar currency pair was up 0.25 percent to 1.0507.
However, Australia's stock market had a lackluster trading day, closing 0.16 percent down.
A downgrade by Fitch ratings agency, which cut China's long-term local currency credit rating to A-plus from AA-minus on Tuesday with a stable outlook, weighed on investor sentiment. It cited financial risks from rapid credit expansion alongside the rise of shadow banking activity for the downgrade.