Dollar, Aussie Decline After Downbeat China Data

The U.S. dollar and Australian dollar both fell Tuesday after weaker-than-expected Chinese manufacturing figures added to concerns about slowing in the world’s second-largest economy.

The Australian dollar  slid to $1.0227, pulling back after the data from its $1.0255 level late Monday in North American trade.

The U.S. dollar also gave ground, with the ICE dollar index , a measure of the greenback against a basket of six other major currencies, falling to 82.688 from 82.722.

The U.S. currency also fell against the Japanese yen , buying ¥98.86 yen, down from ¥99.36 late Monday. The dollar traded around ¥99.20 just before the release of a preliminary Chinese factory activity report for April.

However, the WSJ Dollar Index , another gauge of the U.S. unit’s strength that uses a slightly larger basket, rose to 73.91 from 73.60 late Monday.

Early Tuesday, the preliminary or “flash” version of HSBC’s China manufacturing Purchasing Managers’ Index (PMI) fell to a two-month low of 50.5 from March’s final reading of 51.6. The April result missed a Bloomberg forecast of 51.5.

“New export orders contracted after a temporary rebound in March, suggesting external demand for China’s exporters remains weak,” said HSBC chief China economist Hongbin Qu of the report.

The Australian currency can be sensitive to Chinese economic data as China is a key consumer of Australian resources, including iron ore, coal and agricultural products.

Although the China PMI headline index stayed above the 50 mark that divides growth from contraction, the subindex for sector employment swung to a decrease, as did the gauge of new export orders.

“No surprise that new export orders are decreasing considering the austerity in Europe and slow growth in the U.S. Expansion of finished goods and a slowing of employment may also be of concern,” Kim Eng Securities strategist Andrew Sullivan wrote after the data release.

Sullivan noted that China has said it would sacrifice some growth to facilitate structural reform. China has been working to shift its economic focus toward more domestic consumption.

Chinese stocks as measured by the Shanghai Composite  extended their losses after the data.

Meanwhile, the dollar’s decline against the yen followed its pullback on Monday after a 0.6% drop in sales of U.S. existing homes in March. The seasonally adjusted annual rate of 4.92 million was below the annual pace of 5.03 million sales expected in a MarketWatch poll of economists.

The dollar had resumed its run toward the psychologically key level of ¥100 in the wake of Friday’s Group of 20 meeting that offered no objections to Japan’s aggressive stimulus measures. But the dollar still hasn’t traded above ¥100 since April 2009.

The euro saw further losses against the yen after the HSBC PMI report, trading at ¥128.84 compared with ¥129.63 late Monday. PMI reports from Germany and the euro zone as a whole were due to be released later Tuesday.

Against the dollar, the euro  bought $1.3039, slipping from $1.3050 on Monday.

The British pound   was largely unchanged at $1.5267.

Marketwatch