China boosts Aussie dollar

The Australian dollar is up 0.5% against the US dollar after a strong manufacturing report from China.

The HSBC Chinese purchasing managers' index came in at 51.2 in September, a six-month high topping analysts’ expectations of 50.9, which lead traders to buy the Australian dollar. China is the second largest economy and largest importer of copper in the world, so a strong manufacturing sector in China provides a boost to the Australia economy.

The Australian dollar has lost nearly 10% versus the US dollar over the past six months, after Chinese manufacturing slipped into contraction territory during the summer. To counteract this the Reserve Bank of Australia (RBA) cut interest rates to a record low of 2.5%, in order to stimulate the domestic economy rather than leave the country dependent on the mining sector.

Last week Australian unemployment hit a four-year high, highlighting cracks in the economy. There is talk that the RBA could cut interest rates in November, and if this speculation gains momentum the Australian dollar may head towards the $0.90 mark.


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