Weaker-than-expected Chinese manufacturing data sent the dollar lower today, ahead of all-important US employment figures due overnight.
China's official Purchasing Managers Index fell to 50.4 in January from 50.6 in December, lower than the median forecast of 51 made by 10 economists in an earlier Dow Jones Newswires poll. A PMI reading above 50 indicates an expansion in manufacturing activity from the previous month, whereas a reading below indicates contraction.
The number sent the Australian dollar to a session low of $US1.0384, down from $US1.043 in early trading. At 4.14pm AEDT the Aussie was buying $US1.0391.
Earlier today, data produced by an industry group showed Australia's manufacturing sector contracted for the 11th-straight month in January as the nation's producers found themselves squeezed between a slowing economy and a strong exchange rate.
The Australian Industry Group Performance of Manufacturing Index fell 4.1 points to 40.2 from December. A reading below 50 separates contraction from expansion.
But positive data emerged from the real estate sector. Capital-city house prices rose 1.2 per cent in January from December, according to property research by RP Data-Rismark, offsetting an equivalent fall in the prior quarter and weakening the case for further rates cuts by the Reserve Bank of Australia.
Over the year to January, house prices rose by 1.8 per cent, the data showed.
For now, all eyes are on US non-farm payrolls for January. Anything less than the 165,000 jobs that economists expect to be added in the month will disappoint investors.
"The Australian dollar could be looking at a fall to $US1.037 ... if we see a risk-off theme in the aftermath of the US jobs report," said Tim Waterer, currency strategist at CMC Markets.
"The Australian dollar will likely bear the brunt of any broad downward shift in risk sentiment, while conversely the moves higher by the Aussie could be limited with the euro attracting much of the buying enthusiasm in currency markets these days."
Investors will be watching for fresh cues next week, which will see a series of Australian macroeconomic data releases. Employment, retail sales and building approval figures are due and the RBA will hold its first policy meeting of the year. Only two out of 16 economists surveyed by Dow Jones expect a rate cut to 2.75 per cent from 3 per cent.
"The case for further rate cuts remains strong and I continue to see more cuts in the months ahead," said Shane Oliver, economist at AMP Capital.
"The mining investment boom is slowing rapidly and bank lending rates still look too high to drive a decent recovery in sectors of the economy like housing and retail at a time when the (Aussie) remains strong."
