Dollar Dips, Aussie Slides As China Factory Survey Disappoints
The dollar dipped and its Australian counterpart skidded on Thursday after a disappointing China survey rekindled concerns about emerging market economies and buoyed currencies such as the yen.
Activity in China’s factories shrank again in February as employment fell at the fastest pace in five years, a preliminary private survey showed on Thursday.
The soft Chinese survey was a blow to the Australian dollar, which shed 0.5 percent to $0.8957, coming down from $0.9012 reached earlier in the session.
The Australian dollar closely tracks economic fortunes of China, Australia’s biggest trading partner.
“The PMI survey revived the idea that the Chinese economy is stagnant. Even if the Reserve Bank of Australia refrains from cutting rates, it is not the ideal condition to go long on the Australian dollar,” said Masashi Murata, senior currency strategist at Brown Brothers Harriman in Tokyo.
The dollar index .DXY, which had risen to 80.235 the previous day after minutes of the U.S. Federal Reserve showed policymakers remained committed to reducing its massive stimulus at the current pace, was down 0.1 percent at 80.141.
The dollar was down 0.3 percent at 102.02 yen, having pulled back from a low of 102.41 hit earlier in the day, as the China survey cooled risk sentiment, dragging the Nikkei average .N225 lower.
The euro was at $1.3746 after reaching a seven-week high of $1.3773 against the greenback following the release of the Fed minutes on Wednesday.
The minutes of the Fed’s January 28-29 policy meeting, which was then-chairman Ben Bernanke’s last, showed several policymakers wanted to emphasize that its asset-purchase program would be trimmed in predictable, $10-billion steps unless the economy’s performance surprises them.
Still, market participants remained cautious over the Fed holding up the pace of its tapering in the wake of recent data suggesting U.S. economic growth may be slowing.
“U.S. economic data have turned from good to bad lately. This raises the possibility of the Fed delaying its taper – which would boost safe haven currencies like the Swiss franc,” said Bart Wakabayashi, head of forex at State Street Global Markets in Tokyo.
Wednesday produced another dim reading on the U.S. economy. Commerce Department data showed U.S. housing starts recorded their biggest drop in almost three years in January.
The euro was at 140.21 yen moving further away from a three-week peak above 141.00 yen hit on Tuesday.
The Canadian dollar licked its wounds after having tumbled more than 1 percent on Wednesday, its biggest drop in over two years, after dismal domestic wholesale trade data.
In Asia on Thursday, the Canadian dollar traded at C$1.1085 to the U.S. dollar, having slid from a one-month high of C$1.0911 hit early on Wednesday.
Source : Reuters
