Australian dollar soared against its US peer on Monday, following the release of stronger than projected manufacturing PMI data out of China.
Having lost 1.35% last week, AUD/USD pair hit a session high at 0.8992 at 6:22 GMT, after which consolidation followed at 0.8985, advancing 0.94% on a daily basis. Support was likely to be found at August 5th low, 0.8846, while resistance was to be encountered at August 29th high, 0.8977.
China Logistics Information Center reported that countrys manufacturing PMI increased to a reading of 51.0 in August, or the highest point in 16 months, from 50.3 in July, while experts had anticipated that the index will advance to a value of 50.6. In addition, HSBC Holdings Plc and Markit Economics said today that the final reading of their PMI for China came in at 50.1 in August from 47.7 in July, marking its largest rate of increase since 2010. Increased domestic and foreign demand spoke of a gradual economic recovery. Values above the key level of 50.0 usually indicate expansion. This data boosted the appeal of the Aussie, as China is Australias largest export partner.
“The reason why the Aussie is holding up is because China has stabilized,” said Janu Chan, an economist at St. George Bank Ltd. in Sydney, cited by Bloomberg. “The RBA is leaving the dollar open for another rate cut and we have in our forecasts a cut in November.”
Another positive signal for the Australian dollar was submitted earlier out of Australia, where the Bureau of Statistics said that building approvals rose by 10.8% in July, considerably outpacing preliminary estimates of a 4.0% increase, following the 6.3% drop in June, according to revised data. In annual terms, the indicator advanced 28.3% in July, after the 11.8% decline, registered a month ago.
At the same time, company operating profits in Australia shrank 0.8% during the second quarter of the year compared to the first, after rising by 3.5% in Q1, while expectations pointed a 0.9% increase.
Investors saw a 50% probability that the Reserve Bank of Australia (RBA) will reduce its benchmark interest rate from the current 2.5% level by the end of the year.
“Markets are still focused on a rate cut in the short term,” said Darryl Conroy, a Brisbane-based analyst at Suncorp Group Ltd., cited by Bloomberg. “Any bounce in the Aussie will be quite capped because the market is focusing on some of the negatives.”
Meanwhile, the Aussie was gaining ground against the euro as well, with EUR/AUD cross decreasing by 0.92% to trade at 1.4718 at 6:54 GMT. AUD/NZD pair, on the other hand, dipped 0.10% for the day to trade at 1.1509 at 6:54 GMT.
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