The AUD/USD fell to a fresh six-year low last week after signs of a slowdown in the Chinese economy. The Aussie slipped below .7300 U.S. Dollars for the first time since May 2009 on news that Chinese manufacturing activity slowed more than expected, while good U.S. labor data bolstered bets that the is on track to hike interest rates later this year.
According to flash Caixin/Markit manufacturing purchasing managers’ index (PMI) dropped to 48.2, below economists’ estimate for a reading of 49.7 and the lowest reading since April last year. This news represented the fifth straight monthly decline below 50, a sure sign of contraction in the economy. It was also the lowest reading since April 2014.
In other news, ratings agency Standard and Poor’s reaffirmed Australia’s triple-A credit rating, but warned it could be lowered “if budgetary performance does not improve broadly as we currently expect”.
Because of falling commodity prices, a tired Chinese economy and the strong possibility of a Fed rate hike in September, the pressure should continue to be on the Aussie. There may be periodic short-covering rallies and a few economic surprises over the near-term, but rallies are likely to be capped. If investors decide to really dislike the Aussie then we may even see the selling of weakness which could cause an even faster drop in price.