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The manufacturing purchasing manager’s index report for October came in at 51.4, which, compared with 51.1 in September, represents the fastest rate of expansion in 18 months. A stronger rate of Chinese manufacturing is positive for the Australian dollar, due to the amount of trade between the nations.
Australia’s economy is also growing stronger, as displayed by an increase in the quarterly producer price index following a rise of the cost of raw material by 1.3% in the third quarter. Analysts were only expecting an increase of 0.4%. A higher cost of materials is not generally good for business, but it does indicate strong demand.
As stated by Stan Shamu, the credit market in China is still on traders’ radars due to the Chinese central bank injecting 16 billion yuan into the system, to ensure the liquidity lines are kept open. The spike in the cost of borrowing in June was one of the factors that pushed the dollar lower.
The currency has been in an upward trend since September. If we see the currency drift lower we could see traders buying the dips.