Australian Dollar (AUD) Briefly Bolstered by Manufacturing Data

April 1, 2015 - Written by John Cameron

STORY LINK Australian Dollar (AUD) Briefly Bolstered by Manufacturing Data

During the South Pacific session the Australian Dollar was able to gain on several of its main currency rivals and achieve a high of 0.7664 against the US Dollar as Australia and China published better-than-forecast economic reports. The ‘Aussie’ had previously floundered as investors speculated on the possibility of the Reserve Bank of Australia (RBA) cutting interest rates at its next gathering and the price of iron ore (a major Australian commodity) bombed. However, the Australian Dollar recouped some of these losses as the AiG Performance of Manufacturing Index showed improvement. Although the measure remained below the 50 mark separating growth from contraction, the index did rise from 45.4 to 46.3. AiG chief executive Innes Willox said of the result; ‘The lower Dollar continues to boost manufacturing expert volumes. However, despite stronger residential building activity and some easing of the intense pricing pressures from imports flowing from the lower Dollar, weak local demand continues to weigh heavily on activity. The other side of the lower value of the currency is that it is lifting prices for imported inputs, and we expect it will take some time for manufacturers to adjust.’

The Australian Dollar also derived support from the news that the manufacturing sector of Australia’s largest economy, China, returned to growth in March. Manufacturing PMI advanced from 49.9 to 50.1, with the final HSBC Manufacturing PMI being positively revised from 49.2 to 49.6. The drop in the price of iron ore has been largely due to weaker demand from China so this result could see the value of the asset increase. However, during the European session the Australian Dollar reversed some of its advance, with the Australian Dollar to US Dollar currency pair shedding -0.25% to trade in the region of 0.7597. The Australian Dollar was able to hold its own against a broadly softening Pound though, and the AUD/GBP pairing advanced to 0.5144.

Before the weekend further Australian Dollar exchange rate movement could be caused by Australia’s job vacancies and trade balance numbers and China’s HSBC Services/Composite PMIs. Should the Chinese gauges show improvement, the ‘Aussie’ could advance against a number of its rivals.

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