Dollar falls slightly after Chinese data

THE Australian dollar is slightly higher but took a dip following the release of weaker than expected Chinese manufacturing data.

THE Australian dollar is slightly higher but took a dip following the release of weaker than expected Chinese manufacturing data.

At 12pm AEDT today, the currency was trading at 104.10 US cents, up from 104.06 US cents yesterday.

The Australian dollar had reached a high of 104.46 earlier in the session before falling on news that manufacturing activity in China expanded at a slower rate in January.

The official purchasing managers' index (PMI) stood at 50.4 in January, according to media reports, compared to a reading of 50.6 in the previous month. An index level above 50 indicates the sector is expanding.

Commonwealth Bank currency strategist Peter Dragicevich said the PMI was softer than anticipated but still fell within expectations.

"There's typically some seasonal slowness or softness in January (because) a lot of production orders get brought forward in December in China to come in before the Chinese New Year holiday," he said. "It came in slightly below expectations and the Aussie's taken a bit of a dip, that's been the major movement this morning."

Mr Dragicevich said the local currency had been propped up by a weaker US dollar.

"In those terms, the Aussie should remain relatively supported," he said. "It has drifted a bit lower over the last few weeks, mainly because of the weakness in the non-Japan Asian currencies."

Meanwhile, Australian bond futures prices were lower at noon. At 12pm AEDT today, the March 10-year bond futures contract was trading at 96.520 (implying a yield of 3.480 per cent), down from yesterday's local close of 96.570 (3.430 per cent). The March three-year bond futures contract was at 97.140 (2.860 per cent), down from 97.190 (2.810 per cent).