China's September Caixin Manufacturing PMI contracts to 49.3, Services PMI drops to 50.3

Tony
Updated
Mitrade
coverImg
Source: DepositPhotos

China's Caixin Manufacturing Purchasing Managers' Index (PMI) contracted to 49.3 in September after reporting 50.4 in August, the latest data showed on Monday.


Meanwhile, the Chinese Caixin Services PMI dropped sharply to 50.3 in September from August’s 51.6.


AUD/USD reaction to China’s Caixin PMI data

At the time of writing, the AUD/USD pair is paring back gains to trade near 0.6920, still up 0.27% 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 value of the Australian Dollar (AUD). When the Chinese economy is doing well it purchases more raw materials, goods and services from Australia, lifting demand for the AUD, and pushing up its value. The opposite is the case when the Chinese economy is not growing as fast as expected. Positive or negative surprises in Chinese growth data, therefore, often have a direct impact on the Australian Dollar and its pairs.


Iron Ore is Australia’s largest export, accounting for $118 billion a year according to data from 2021, with China as its primary destination. The price of Iron Ore, therefore, can be a driver of the Australian Dollar. Generally, if the price of Iron Ore rises, AUD also goes up, as aggregate demand for the currency increases. The opposite is the case if the price of Iron Ore falls. Higher Iron Ore prices also tend to result in a greater likelihood of a positive Trade Balance for Australia, which is also positive of the AUD.


The Trade Balance, which is the difference between what a country earns from its exports versus what it pays for its imports, is another factor that can influence the value of the Australian Dollar. If Australia produces highly sought after exports, then its currency will gain in value purely from the surplus demand created from foreign buyers seeking to purchase its exports versus what it spends to purchase imports. Therefore, a positive net Trade Balance strengthens the AUD, with the opposite effect if the Trade Balance is negative.

 

* The content presented above, whether from a third party or not, is considered as general advice only.  This article should not be construed as containing investment advice, investment recommendations, an offer of or solicitation for any transactions in financial instruments.

goTop
quote
Do you find this article useful?
Related Articles
placeholder
EUR/USD flattens ahead of Trump’s planned reciprocal tariff announcementEUR/USD trades sideways around 1.0830 in Monday’s European session.
Author  FXStreet
16 hours ago
EUR/USD trades sideways around 1.0830 in Monday’s European session.
placeholder
GBP/USD attracts some buyers above 1.2950 on weaker US DollarThe GBP/USD pair gathers strength to near 1.2965 during the Asian trading hours on Monday.
Author  FXStreet
21 hours ago
The GBP/USD pair gathers strength to near 1.2965 during the Asian trading hours on Monday.
placeholder
AUD/USD edges lower below 0.6300 on global trade concernsThe AUD/USD pair trades in negative territory near 0.6280 during the early Asian session on Monday.
Author  FXStreet
23 hours ago
The AUD/USD pair trades in negative territory near 0.6280 during the early Asian session on Monday.
placeholder
EUR/USD looks to build on recovery from multi-week low; holds steady below mid-1.0800sThe EUR/USD pair attracts some dip-buyers following an Asian session dip to the 1.0800 neighborhood and looks to build on its bounce from a multi-week low touched last Thursday.
Author  FXStreet
23 hours ago
The EUR/USD pair attracts some dip-buyers following an Asian session dip to the 1.0800 neighborhood and looks to build on its bounce from a multi-week low touched last Thursday.
placeholder
US Dollar Index maintains position near 104.50 ahead of PCE Price Index dataThe US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, hovers around 104.30.
Author  FXStreet
Mar 28, Fri
The US Dollar Index (DXY), which measures the value of the US Dollar (USD) against six major currencies, hovers around 104.30.
Real-time Quote