PERTH: The Australian dollar has dipped to its lowest level in more than six years on the back of weak Chinese manufacturing data and a note of caution from a key ratings agency.
The currency was trading at US72.69 cents at 1.05pm (AEST), down from around US73.54 cents earlier in the session.
The dollar dropped sharply when the July flash Caixin/Markit China Manufacturing Purchasing Managers’ Index showed a bigger-than-expected fall to 48.2.
“The PMI is the lowest since April 2014, so 15 months,” ThinkForex senior markets analyst Matt Simpson said.
Shortly afterwards ratings agency Standard and Poor’s affirmed Australia’s AAA sovereign credit rating with a stable outlook but said “we could lower the ratings if Australia’s budgetary performance does not improve broadly as we expect”.
S & P added: “Continued parliamentary gridlock on the budget could trigger this scenario, as could an external shock. The latter could come from further deterioration in Australia’s terms of trade, for example, or from a sharp increase in the banking sector’s cost of external funding.”
Mr Simpson said the China PMI reading was yet another blow to the local currency, which was already under pressure.
“You’ve got tired Chinese growth, you’ve got a strong greenback and you’ve got falling commodity prices,” he said.
Because markets in Europe and the US haven’t had time to react to this information, Mr Simpson predicted the Aussie will drift lower in tonight’s night’s session.
But, he said, the US manufacturing PMI slated for release tonight will have the final say.
“There’s a very good chance we’ll be closing near six-year lows this week, which will put it (the Australian dollar) on the back foot for next week,” Mr Simpson said.
He tipped the currency to hit US70 cents later this year.
