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China’s official Manufacturing Purchasing Managers’ Index (PMI) came in at its third straight month of contraction at 49.0 from the previous reading of 49.4, the latest data published by the country’s National Bureau of Statistics (NBS) showed on Tuesday. Markets expected a 49.5 readout in the reported month. The NBS Non-Manufacturing PMI arrived at 50.4 in December versus 50.2 in November, weaker than the estimation of 50.5. Market reaction At the time of writing, the AUD/USD pair is trading around 0.6818,   up 0.01% on the day. Australian Dollar FAQs One of the most significant factors for the Australian Dollar (AUD) is the level of interest rates set by the Reserve Bank of Australia (RBA). Because Australia is a resource-rich country another key driver is the price of its biggest export, Iron Ore. The health of the Chinese economy, its largest trading partner, is a factor, as well as inflation in Australia, its growth rate and Trade Balance. Market sentiment – whether investors are taking on more risky assets (risk-on) or seeking safe-havens (risk-off) – is also a factor, with risk-on positive for AUD. The Reserve Bank of Australia (RBA) influences the Australian Dollar (AUD) by setting the level of interest rates that Australian banks can lend to each other. This influences the level of interest rates in the economy as a whole. The main goal of the RBA is to maintain a stable inflation rate of 2-3% by adjusting interest rates up or down. Relatively high interest rates compared to other major central banks support the AUD, and the opposite for relatively low. The RBA can also use quantitative easing and tightening to influence credit conditions, with the former AUD-negative and the latter AUD-positive. China is Australia’s largest trading partner so the health of the Chinese economy is a major influence on the…

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Filed under: News - @ January 2, 2024 12:42 am