Aussie dollar driven by China

The Australian dollar is up 0.1% versus the US dollar after positive manufacturing data was published for China. 

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.

Spot FX AUD/USD chart

This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.