THE Australian dollar came under pressure in Asian trading today on weakness in Chinese shares and more evidence that the world's second-biggest economy is starting the new year sluggishly. At 5pm (AEDT), the currency was around US89.47c, down from Friday's US89.71c. Earlier in the day, it traded as high as US89.84c. The HSBC China services Purchasing Managers' Index fell to 50.9 in December from 52.5 in November, HSBC Holdings PLC. A reading above 50 indicates on-month expansion and a reading below that level indicates contraction. The moderation of the headline services PMI reflected slower new business growth, Qu Hongbin, HSBC chief economist for China, said in a statement. New order growth reported by the service providers in December was the weakest in six months, HSBC said. China is Australia's biggest trading partner, making the Australian dollar prone to react sharply to news from the country. Sean Callow, currency strategist at Westpac, said weakness in Chinese shares from the Asia day's open also weighed on the Australian dollar. The decline came amid concerns over a surplus of new share issuances following this month's restart of China's market for initial public offerings. David de Ferranti, market analyst at FXCM, said the Australian dollar could see some support over the week on short-covering, with estimated short positions nearing record levels. With most watchers of the RBA forecasting little risk of further cuts in interest rates this year, support might return to the Australian dollar, Mr de Ferranti said. The cash rate is at 2.50 per cent, after eight cuts since late 2011. "The cash rate is still expected to remain on hold over the near term. This may create renewed demand for the local currency over the coming weeks, and help the Australian dollar move back above US90c," he said.

Source