Antipodean Currencies Slide As China Manufacturing Activity Contracts

(RTTNews) - The antipodean currencies such as the Australia and the New Zealand dollars weakened against other major currencies in the Asian session on Tuesday, after China's manufacturing activity contracted for the first time in eight months in May as the rise in US trade tariff damped export orders.

Data from S&P Global showed that the Caixin manufacturing Purchasing Managers' Index unexpectedly fell to 48.3 in May, down from 50.4 in April. The score was seen at 50.8. The score fell below the neutral 50.0 mark for the first time in eight months and the reading was the lowest since September 2022.

The official PMI data released over the weekend suggested that the manufacturing activity shrank at a slower pace in May. The factory PMI rose to 49.5 in May from 49.0 in April. Meanwhile, the non-manufacturing PMI dropped marginally to 50.3 from 50.4 in the previous month.

According to RBA minutes from its May monetary policy meeting released today, the board saw a stronger case for a 25-basis point drop, preferring a cautious and predictable policy. The policymakers stated that US trade policy had a significant and negative impact on the global outlook but had not yet harmed the Australian economy; yet they did not persuade that a 50-basis point cut was required.

The assistant governor of the Reserve Bank of Australia (RBA) Sarah Hunter warned, "Higher US tariffs will put a drag on the global economy,". Hunter added that increased uncertainty may hurt Australia's output, jobs, and investment.

Meanwhile, traders reacted to news that the U.S. and China could revive trade talks as soon as this week after US President Donald Trump accused China of violating the trade agreement reached last month. The sharp increase in price of commodities such as gold and crude oil also aided the upside in the markets.

The Trump administration has also reportedly asked its trade partners to provide their "best offer" on trade negotiations by Wednesday, in order to finalize deals before July 8.

In the Asian trading today, the Australian dollar fell to 4-day lows of 92.22 against the yen and 1.7695 against the euro, from recent highs of 92.86 and 1.7614, respectively. If the aussie extends its downtrend, it is likely to find resistance around 90.00 against the yen and 1.78 against the euro.

Against the U.S. and the Canadian dollars, the aussie edged down to 0.6452 and 0.8863 from recent highs of 0.6500 and 0.8911, respectively. The aussie may test support around 0.62 against the greenback and 0.87 against the loonie.

The NZ dollar fell to 85.79 against the yen and 1.9026 against the euro, from recent 5-day highs of 86.54 and 1.8898, respectively. If the kiwi extends its downtrend, it is likely to find support around 83.00 against the yen and 1.92 against the euro.

Against the U.S. and the Australia dollars, the kiwi slipped to 0.6000 and 1.0760 from a recent 7-1/2-month high of 0.6055 and more than a 1-month high of 1.0727, respectively. The kiwi is likely to find support around 0.58 against the greenback and 1.09 against the aussie.

Looking ahead, Eurozone CPI data for May and unemployment rate for April are set to be published at 5:00 am ET.

In the New York session, U.S. Redbook report, U.S. factory orders for April and U.S. RCM/TIPP economic optimism index for June are slated for release.