The Australian dollar dropped to a six-year low and the New Zealand dollar also retreated after a gauge of Chinese manufacturing activity unexpectedly slipped to the weakest in more than a year. It dropped sharply when the July flash Caixin/Markit China Manufacturing Purchasing Managers’ Index showed a bigger-than-expected fall to 48.2.
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A reading above 50 indicates expansion, while a reading below that represents contraction.
China’s gross domestic product rose 7 percent in the three months through June from a year earlier, unchanged from the first quarter and beating economists’ estimates for 6.8 percent.
“China’s industrial economy has had a hard landing or is in industrial recession in my opinion”, he said.
The monetary divergence theme – the Federal Reserve has its sights on raising rates while the European Central Bank and Bank of Japan are still deeply committed to monetary easing – is widely expected to favor the dollar in the long term.
Economists polled by Reuters this month said they expect China to reduce interest rates by 25 basis points before the year-end.
The reading comes below market consensus of 49.7, and compares with last month’s flash reading of 49.6.
The weekly employment data showed that initial jobless claims declined 26,000 to a seasonally-adjusted 255,000, the lowest since November 1973.
The poor survey contrasted with recent data that suggested the world’s second-largest economy was stabilising after the government said annual growth in April-June held steady at 7 per cent, slightly better than market expectations.
Because markets in Europe and the US haven’t had time to react to this information, Mr Simpson predicted the Aussie will drift lower in Friday night’s session.
Spot gold skidded about 1 percent on the day to $1,079.24 an ounce, on track for a weekly loss of almost 5 percent, after marking its deepest one-day loss in almost two years on Monday.
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Brent added 0.3 percent to $55.46, after it settled at its lowest level since April 2 on Thursday, amid persistent fears about a global supply glut.
