Aussie dollar continues to fall

The commodities pullback continued to weigh on the unit in late trade.

The Australian dollar has slipped as weak Chinese economic data drives a pullback in commodities.

At 6pm (AEST) on Tuesday, the local unit was trading at 73.39 US cents, down from 73.17 cents on Monday.

IG market analyst Angus Nicholson says early indications suggest China will not continue its rate of stimulus into the second quarter.

A slew of recent economic data out of China suggests the recent pick up in Chinese activity appears to be levelling off, he said. “Slightly lower manufacturing PMIs, further declines in imports growth and relatively unmoved CPI inflation are all providing fundamental support to the pullback seen in a range of commodity prices,” he said.

Copper has lost more than 5.8 per cent in the past week, which hurts commodity currencies like the Aussie, Mr Nicholson said. “Iron ore has similarly collapsed, losing 20.5 per cent since April 22, which qualifies as a technical bear market, coming a mere month after it entered a technical bull market,” he said.

Commodities are also likely to suffer in a rising greenback environment, with the US dollar supported by recent hawkish comments from the US Federal Reserve, he said.

At 5pm (AEST), the Australian dollar was at 79.81 Japanese yen, up from Monday’s close of 79.22 yen, and at 64.49 euro cents, unchanged.

The Australian bond market continues to rise after risk sentiment soured overnight.

Deutsche Bank fixed income strategist David Plank says US Treasuries surged overnight amid a risk-off tone on equity markets and weakness in commodities.

“So we also opened with prices higher and we continued to rally in the morning,” he said.

“But we’ve sold off a couple of basis points during the course of the day.” With no domestic data to drive direction and a mixed performance from equity markets, Mr Plank said price action was subdued.

AAP