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Australia, NZ dollars on the skids after weak China PMI survey

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[SYDNEY] The Australian and New Zealand dollars were stung on Thursday by a private survey showing an unexpected slump in China's manufacturing activity.

The Australian dollar fell to US$0.7394, from US$0.7431 earlier in the day. A break of US$0.7370 would test a trough of US$0.7329 touched last month.

The Aussie dropped around half a US cent after a disappointing economic report from China, Australia's top export market.

A private survey of China's manufacturing activity contracted in May for the first time in nearly a year. That contrasted with an official survey released on Wednesday showing activity remained in expansionary territory.

Market voices on:

"AUD was enjoying a surprise rebound from retail sales today, for all of a couple of minutes before China's manufacturing PMI spoiled the party," said Matt Simpson, a senior analyst at ThinkMarkets.

Earlier in the session, domestic retail sales posted their best monthly sales in nearly three years in April with a rise of one per cent, versus forecasts of a gain of 0.3 per cent.

Meanwhile, the euro extended its rise, scaling a one-year high of A$1.5225. The common currency clocked a gain of more than 4 per cent in May for the second consecutive month. A break of A$1.5363 would target the May 2016 high of A$1.5644.

The Aussie fell hard against the safe-haven Swiss franc to stand near one-year lows.

Across the Tasman sea, the New Zealand dollar slipped to US$0.7076, away from a three-month high of US$0.7124 hit overnight.

It also lost ground against a sturdy euro which bounced to NZ$1.5916, from Wednesday's low just under NZ$1.5700.

Data at home showed terms of trade jumped 5.1 per cent to the highest level since June 1973.

New Zealand government bonds gained, sending yields 2.5 basis points lower at the long end of the curve.

Australian government bond futures held firm near six-month highs, with the three-year bond contract unchanged at 98.330. The 10-year contract edged up one tick to 97.5950, while the 20-year contract added 1.5 ticks to 97.0300.