TA:Slower China outlook weighs on Australian dollar
THE Australian dollar fell sharply today after the latest data on China’s manufacturing sector warned of a another slowdown in Australia’s biggest trading partner.
At 5pm (AEDT), the local currency was at US89.53c versus US90.18c at the same time yesterday.
The Aussie hit a five-week high of US90.82c on Tuesday as risk aversion in global markets receded and the Reserve Bank of Australia reiterated that steady interest rates were appropriate after inflation rose more than expected in the December quarter.
But the exchange rate was on track for its biggest one-day fall in four weeks after HSBC’s flash China manufacturing purchasing managers’ index hit a seven-month low of 48.3 in February.
“We expect this weak report to stoke risk aversion into the London session, with most Asia-Pacific equities sliding after the headlines,” said Annette Beacher, head of Asian-Pacific research at TD Securities.
Ms Beacher nevertheless noted that China’s exports were exceptionally strong in January and that the February manufacturing data could have been affected by the Lunar New Year holidays. “We remain of the view that this indicator tends to regularly overstate the downside in China’s economy,” she said. “This is now the third ‘Chinese hard landing’ scare in the last eighteen months.”
Nomura economist Zhiwei Zhang said a recovery in China’s economic growth in the three months to December wasn’t sustainable, and that GDP growth will likely slow to 7.5 per cent in the March quarter and 7.2 per cent in the June quarter, prompting China to loosen monetary policy.
