Dollar slips as China worries vanquish investor risk appetite

Sun Nov 1, 2015 10:15pm EST
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By Lisa Twaronite and Ian Chua

TOKYO/SYDNEY (Reuters) - The U.S. dollar edged down in Asian trading on Monday, as investors' appetite for risk evaporated against a background of downbeat Chinese factory surveys.

The Australian dollar, a proxy for China plays because of that country's massive trade exposure to China, touched its session high of $0.7148 AUD=D4 immediately after the release of the Caixin/Markit China Manufacturing Purchasing Managers' Index (PMI). The index edged up to 48.3 in October from 47.2 in September and showed that export orders marked their first rise since June.

But the Aussie soon pared its modest rise, and was last just a few ticks above its level in Friday's late North American trade at $0.7140. Investors realised that taken overall, the figures still painted a bleak picture of shrinking manufacturing activity below the boom-or-bust threshold of 50 despite Beijing's raft of stimulus measures.

The private survey came in the wake of China's official survey on Sunday, which showed activity in its manufacturing sector unexpectedly contracted in October for a third month, fuelling fears the economy may still be losing momentum.

An interest rate decision by Australia's central bank on Tuesday - one that analysts say is too close to call - will also be closely watched.

"Not so long ago the consensus view was that the RBA would remain on the sidelines for an extended period," said Michael Blythe, chief economist at Commonwealth Bank.

"But a lift in mortgage rates and a low-side inflation reading reignited the rate cut debate."

Whether the Reserve Bank of Australia cuts or not on Tuesday, the risk is that it may sound dovish in what would be an unwelcome development for Aussie bulls, analysts say.   Continued...

A U.S. one-hundred dollar bill (C) and Japanese 10,000 yen notes are spread in Tokyo, in this February 28, 2013 picture illustration. REUTERS/Shohei Miyano