The dollar extended Monday’s losses in today’s Asian trading with the dollar index down 0.5% in late session. Losses on Wall Street, uncertainty over a September rate rise and risk-off sentiment weighed on the greenback. Weaker-than-expected Chicago PMI figures did not help the dollar either.
The greenback was back below the 121 level against the yen, trading at 120.41 yen in late Asian session. The euro also moved higher against the dollar, rising to 1.1285 dollars, but the pound saw more limited gains, climbing to 1.5396 dollars.
The Reserve Bank of Australia left interest rates unchanged in its latest monetary policy meeting, as expected. In its statement, the RBA cited the ‘softening conditions in China and east Asia’ but also pointed to stronger growth in the US, while it expects the Australian economy to grow moderately. But it maintained its change in tone from its last meeting and made no calls for a weaker exchange rate, saying that the ‘Australian dollar is adjusting’ to the significant falls in commodity prices.
The aussie, which has fallen by around 2 cents since the RBA’s last meeting, briefly jumped to 0.7153 against the US dollar but soon headed lower again, falling to 0.7113 in late Asian trading.
PMI data from China appeared to confirm the weakening manufacturing outlook in the world’s second largest economy. The official manufacturing PMI for August fell to 49.7, in-line with estimates and down from 50.0 the previous month. This is the first time since February that the official PMI reading has been below 50, in contraction territory. The non-manufacturing PMI was also lower but above 50 at 53.4. Meanwhile, the final reading of the Caixin/Markit manufacturing PMI was revised up to 47.3 from 47.1.
Crude oil prices closed sharply higher – by over 8% – for a third straight day on Monday on reports that OPEC may be willing to discuss cutting production. Prices fell back on Tuesday though with WTI futures down 3% at $47.75 and Brent futures down 2.6% at $52.75. The higher oil prices lifted the Canadian dollar with the greenback plunging to around 1.3159 in late Asian session from a high of 1.3326 yesterday.
The remainder of the day will be a busy one for business sentiment surveys as final manufacturing PMI figures are published for the Eurozone. UK manufacturing PMI will also be released, which is expected to show a slight improvement for August. Also to watch out for are Canadian GDP figures for the second quarter and the ISM manufacturing data for August in the US.