Dollar drops on weak China economic figures

THE Australian dollar has fallen almost half a US cent after the release of weaker than expected Chinese manufacturing figures.

THE Australian dollar has fallen almost half a US cent after the release of weaker than expected Chinese manufacturing figures.

Easy Forex currency dealer Tony Darvall said the Australian dollar was not doing very much this morning until the release of Chinese manufacturing data at noon.

China's purchasing managers index for October, a key indicator of manufacturing activity, fell for the first time in three months.

The index dropped to 50.4 in October from 51.2, showing that the expansion of China's manufacturing sector is slowing.

"We just got some weaker than expected Chinese PMI and the market is under a lot of pressure right now," Mr Darvall said.

"It's putting US (equity) futures and stock markets under pressure as well."

At 12.11pm (AEDT) today, the local unit hit the day's low of 104.99 US cents, falling from 105.33 at 11.59am (AEDT), just before the release of the Chinese data.

The currency finished yesterday's local session at 105.29 cents.

Mr Darvall said the Chinese PMI gave the Australian dollar a weak lead going into this afternoon's interest rate announcement by the Reserve Bank of Australia (RBA).

Eleven of the 17 economists surveyed by AAP predict the RBA board will cut the cash rate from 4.75 per cent to 4.5 per cent today .

"The RBA decision is pretty borderline," he said.

"So when it's 50-50, the market is going to react a little more, so you're looking at at least a fifty point (half a US cent) move or more, after the RBA announcement."

Meanwhile, Australian bond prices were higher at noon.

At midday (AEDT) today, the December 10-year bond futures contract was trading at 95.530 (implying a yield of 4.470 per cent), up from 95.460 (4.540 per cent) yesterday.

The December three-year bond futures contract was at 96.180 (3.820 per cent), up from 96.100 (3.100 per cent).