AUD/USD hits two-month lows as HSBC manufacturing PMI for China slows, RBA Stevens hints intervention

Australian dollar fell to lows unseen in two months against its US counterpart on Thursday after the release of downbeat data on manufacturing activity out of China in November, while the Fed minutes, published on Wednesday, still supported the greenback.

AUD/USD slid to a daily low at 0.9257 at 9:10 GMT, also the pairs lowest point since September 15th, after which consolidation followed at 0.9270, losing 0.69% for the day. Support was likely to be found at September 15th low, 0.9246, while resistance was to be met at November 15th high, 0.9375.

Earlier in the day HSBC Holdings Plc and Markit Economics reported that Chinese economy slightly slowed down its momentum in November, as the preliminary value of the index, gauging manufacturing activity in the country decreased due to less new orders and slowing rate of recovery in inventories. Despite that, Novembers results appeared to be the strongest in the past seven months. The manufacturing PMI came in at a reading of 50.4 in November, below forecasts of a value of 50.8, and slowing down in comparison with the final value registered in October, or 50.9. Values above the key level of 50.0 are usually indicative for expansion in activity.

As inflationary pressure remains low, the Chinese central bank will probably maintain its loose monetary policy in order to spur economic growth. The above mentioned slowdown in manufacturing sector, however, may pose greater challenges in the process of imposing the package of reforms, announced earlier in the week. These reforms include weaker control over interest rates and expanded land rights for farmers in the country.

This manufacturing data influenced the Australian dollar, as China is Australias largest export market.

“A shift in China away from investment-intensive and commodity-hungry growth toward more consumption-oriented growth will be negative for the Aussie dollar,” said David Forrester, a senior vice president for Group of 10 foreign-exchange strategy at Macquarie Bank Ltd. in Singapore, cited by Bloomberg News. The manufacturing report “shows that China’s economic recovery remains sideways.”

In addition, the MSCI Asia Pacific Index of shares fell 0.6%, marking its third consecutive daily loss.

Australian government bonds decreased for a fifth consecutive day on Thursday, with the yield on the 10-year government note rising seven basis points, or 0.07 percentage point, to reach 4.34%, or the highest level since March 2012.

The Aussie extended losses also, after Reserve Bank of Australia (RBA) Governor Glenn Stevens said that the bank will not close the opportunity for an intervention on the currency market, in case it assesses such a move as effective and providing a boost to major economic indicators. These comments hinted that the RBA may probably consider an intervention in order to reduce the value of the Aussie.

In the mean time, the US dollar remained supported after the publication of the minutes of Federal Reserve Bank’s policy meeting in October on Wednesday. It revealed that central bank’s policymakers “generally expected” employment data, coming out of the United States to improve, as this would “warrant trimming the pace of purchases in coming months.” The bank currently purchases 85 billion USD of Treasuries and mortgage-backed securities each month. According to the minutes, Federal Open Market Committee (FOMC) members also underscored that the Quantitative Easing is entirely dependent on economic data. A possible tapering of asset purchases may occur when data pointed that US economy was picking up the pace.

The yield on US 10-year government bonds touched 2.81%, a level unseen since September 18th.

Elsewhere, the Aussie was lower against the euro, with EUR/AUD cross advancing 0.66% on a daily basis to trade at 1.4493 at 9:45 GMT. AUD/NZD pair was trading steadily, gaining 0.04% for the day to trade at 1.1294 at 9:46 GMT.