Weak Chinese data hits dollar
At 0700 AEST on Tuesday, the local currency was trading at 92.73 US cents, down from 92.80 cents on Monday.
The HSBC Chinese manufacturing purchasing managers’ index dragged the Australian dollar lower on Monday after falling two points to 48.1 in April.
Economists had expected a pickup of one point to 48.4.
“The weaker than expected Chinese PMI data took its toll on the Australian dollar/US dollar as the pair slipped to 92.51 US cents before finding some support,” BK Asset Management MD Boris Schlossberg said.
“The data re-affirmed the fact that the Chinese manufacturing sector has clearly slowed as the country tries to make the transition from mostly production-driven growth to more consumer oriented expansion.
“The slowdown in Chinese manufacturing demand appears to be a significant long-term trend and, as such, the news is likely to keep a cap on the Australian dollar/US dollar.”
Schlossberg said the Australian dollar could slide closer to 92 US cents on Tuesday if the Reserve Bank of Australia jawbones the currency in its monthly statement.
“… The RBA would prefer to see the Australian dollar closer to the 85 US cent level in order for the economy to rebalance itself,” he said.
The RBA will release its May interest rate decision at 1430 AEST and is widely expected to keep rates on hold at 2.5 per cent.