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Australian Dollar Slides As China's Official Factory PMI Misses Estimate

1/31/2013 10:56 PM ET

The Australian dollar drifted weaker on Friday morning in Asia as China's official factory PMI eased more than expected in the month of January.

China is Australia's largest trading partner and a drop in red dragon's factory sector affects the mineral-rich Australian economy.

According to a survey by the National Bureau of Statistics and the China Federation of Logistics and Purchasing (CFLP), the official PMI measuring China's manufacturing sector performance ticked down to 50.4 in January from 50.6 in December against expectations for an increase to 51.

Meanwhile, an indicator of China's manufacturing activity was revised up to show a faster growth in business activity in January than estimated earlier, detailed results of a survey by Markit Economics showed today.

The headline HSBC/Markit purchasing managers' index rose to 52.3 in January from 51.5 in December. The flash reading was 51.9. The index was at its highest level in two years.

A PMI reading above 50 suggests expansion of the sector. The latest reading indicated a modest improvement of operating conditions in the Chinese manufacturing sector for the third successive month.

Australia's manufacturing sector performance deteriorated further in January, a survey by the Australian Industry Group showed today.

The Performance of Manufacturing Index (PMI) fell to 40.2 in January from 44.3 in the previous month. A reading below 50 indicates contraction of the sector.

At the same time, producer prices is Australia were up 0.2 percent in the fourth quarter of 2012 compared to the previous three months, the Australian Bureau of Statistics said today.

That was below forecasts for an increase of 0.3 percent after adding 0.6 percent in the third quarter.

On a yearly basis, producer prices climbed 1.0 percent - again short of estimates for an increase of 1.2 percent after gaining 1.1 percent in the previous three months.

Majority of Asian stocks are trading lower as traders adopted a cautious stance ahead of the closely-watched non-farm payroll data from the United States later in the day, especially after data showed on Thursday that the U.S. weekly jobless claims rose larger than expected.

The Australian dollar fell against the euro, with the pair approaching to the key 1.31 level after a gap of more than 13-months. On the downside, the Australian currency may find support around the 1.3160 level.

The aussie slipped to 1.2361 against the New Zealand dollar, its weakest level since August 2011. The next key level to watch for the aussie-kiwi pair is seen at 1.2320.

Extending its 2-day losing streak, the Australian dollar reached a 2-week low of 1.0377 against the Canadian dollar on Friday morning in Asia. If the current bearish trend extends further, likely target is visible at 1.0370.

The Australian dollar also reached as low as 1.0398 against the US dollar in early Asian deals on Friday. On the downside, the aussie may find target level at 1.0380 against the greenback.

The aussie eased to 95.44 against the yen from early Asian session's fresh multi-year high of 95.82. If the aussie-yen pair continues to move in a descending track, it may find support around the 93.0 area.

The unemployment rate in Japan came in at a seasonally adjusted 4.2 percent in December, the the Ministry of Internal Affairs and Communications said today.

The headline figure missed forecasts for 4.1 percent, which would have been unchanged from the November reading.

Traders await Japan's vehicle sales for January later in the session.

Italian unemployment figures for December, eurozone's jobless rate for December and inflation estimate for January and the purchasing managers indexes from the major eurozone economies are the key data to watch in the European session.

Besides the much-awaited non-farm payrolls data for January, traders will closely watch data on the University of Michigan's consumer confidence for January, construction spending for December and the ISM manufacturing for January in the upcoming North American session.

by RTT Staff Writer

For comments and feedback: editorial@rttnews.com

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