Australian dollar hits fresh six-year low as Chinese factories continue to falter 

Chinese manufacturing was sluggish for the fifth month running, a new survey shows, while the strengthening greenback sends the Aussie below US73c

The Australian dollar fell to a fresh six-year low and stocks across Asia dropped sharply after more signs of a slowdown in the Chinese economy.

The Aussie dipped below US73c for the first time since May 2009 on news that Chinese manufacturing activity slowed by more than expected, while good US jobs data bolstered bets that the Federal Reserve is on track to hike interest rates later this year.

The flash Caixin/Markit manufacturing purchasing managers’ index (PMI) dropped to 48.2, below economists’ estimate for a reading of 49.7 and the lowest reading since April last year. It was the fifth straight month below 50, the level which separates contraction from expansion, and the lowest reading since April 2014.

In early afternoon trade, the dollar was buying US72.86c having fallen as low as US72.70c.

The ratings agency Standard & Poor’s later reaffirmed Australia’s prized triple-A credit rating but warned that it could be lowered “if budgetary performance does not improve broadly as we currently expect”.

ThinkForex senior markets analyst Matt Simpson said the Chinese figures were yet another blow to the local currency, which was already under pressure.

“You’ve got tired Chinese growth, you’ve got a strong greenback and you’ve got falling commodity prices,” he said. He tipped the currency to hit US70c later this year.

On the stock markets, Japan’s Nikkei index dipped almost 0.7%, even though a similar survey for Japan showed improvement.

“Japan’s PMI was good, but Japanese stocks are reacting more to China’s,” said Ayako Sera, senior market economist at Sumitomo Mitsui Trust Bank in Tokyo.

“Everyone is concerned about the state of China’s economy, and this reaction shows that market is very sensitive to information like this,” she said.

Hong Kong’s Hangseng index was down 0.92% and the Shanghai Composite index, where many of the stocks are still suspended after June’s crash, was up slightly by 0.16%. Australia’s ASX200 benchmark index closed down 24 points, or 0.43% lower at 5566.

The China survey reinforced expectations of more monetary easing ahead from Beijing. China looks set to further reduce interest rates and the amount of cash its banks must hold as reserves to try to keep its economy growing at 7% this year, which would be the slowest pace in a quarter of a century, a Reuters poll showed on Thursday.

Sliding commodity prices are also putting pressure on the Aussie dollar. The price of gold skidded 1.4% to $1,079 an ounce, its lowest level since 2010. It is now on track for a weekly loss of nearly 5%, after marking its deepest one-day loss in nearly two years on Monday.

Copper, often seen as a bellwether of economic growth, slipped more than 1% to $US5,335 per tonne.

However, crude oil futures rebounded from multi-month lows recorded overnight on Wednesday, with U.S. crude up about 0.7 percent at $48.79 a barrel, after marking its lowest settlement since March 31.

Source: theguardian – Australian dollar hits fresh six-year low as Chinese factories continue to falter

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