Australian, NZ dollars slip as weaker China PMI stokes global growth doubts

The Australian and New Zealand dollars fell after a measure of manufacturing in China grew at a slower-than-expected pace this month, stoking concerns that the world’s second-biggest economy is stumbling and global expansion is more muted.

The HSBC Flash Purchasing Managers Index fell to 50.5 in April from 51.6 in March, missing estimates in a Bloomberg survey of 51.5. The unofficial PMI measure comes a week after China’s gross domestic product printed at a weaker-than-expected 7.7 percent.

The Australian dollar recently traded at US$1.0227 from US$1.0252 immediately before the PMI was released. The kiwi dollar slipped to 83.90 US cents from 84.11 cents.

China is Australia’s largest export market and New Zealand’s second-largest after Australia and its economy – the fastest-growing among developed nations – is seen as a barometer of global growth and demand.

The PMI “has injected a big dose of risk aversion into the market,” said Sue Trinh, senior currency strategist at RBC Capital Markets in Hong Kong. “Following the weaker GDP numbers it has only heightened concerns about a slower trajectory for the global economy.”

The reaction was exacerbated by the market being caught long US dollar-yen amid expectations Japan’s currency would weaken below 100 following the Group of 20 meeting last weekend which avoided specific mention of Japan’s money printing.

The yen strengthened against most major trading peers after the PMI and was recently at 98.86 per dollar from 99.26 immediately before.

The Flash PMI showed a 1.9 percent decline in new export orders to 48.6 on a scale where 50 marks the difference between expansion and contraction. Overall new orders slipped to 51.7 from 53.3.

“The overall impression is one of a manufacturing sector that is expanding, albeit modestly, with an OK domestic order book and a poor external equivalent,” said Huw McKay, senior international economist at Westpac Banking Corp in Sydney.

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