Australian dollar declines

The Australian dollar has fallen against its US counterpart Tuesday and is buying 70.59 US cents from 70.99 on Monday.

The Australian dollar is languishing near two and a half year lows following weak economic data from China, the country’s top trading partner, while its New Zealand cousin ticked up after five straight sessions of losses.

In the latest sign that demand in China is continuing to slow, figures over the weekend showed profit growth at its industrial firms slowed for the fifth consecutive month in September as sales of raw materials and manufactured goods ebbed.

In response, the Australian dollar, which is often traded as a liquid proxy for the yuan, slipped 0.1 per cent to 70.86 US cents not far from Friday’s trough of 70.18 US cents which was the lowest since early 2016.

The antipodean currencies have fallen steeply against their US cousin since the start of the year largely on diverging policy with the US Federal Reserve which is on a tightening path.

Australian and New Zealand central banks have repeatedly emphasised the need for interest rates to remain at record lows for some while yet.

In addition, worries about the Sino-US trade war have weighed on growth-linked currencies such as the Aussie.

The currency is already down about 2 per cent so far in October, and has weakened in six of 10 months so far this year.

“The Australian dollar remains unlikely to look like a screaming buy this week,” said David Cottle, analyst at DailyFX.

“However, investors will get a look at official domestic consumer prices. Those data come due on Wednesday.”

Annual headline CPI is seen at 1.9 per cent for the third quarter-ended September, according to a Reuters poll, with core measures, closely watched by the Reserve Bank of Australia, also seen at 1.9 per cent.

Inflation has undershot the central bank’s two to three per cent target band for more than two years now and is the single biggest reason it has left interest rates at 1.50 per cent since last easing in August 2016.

Australian government bond futures were higher too, with the three-year bond contract up two ticks at 97.970.

The 10-year contract climbed 2.5 ticks to 97.42.

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