The Australian dollar gained ground against the US dollar on Monday after China’s official manufacturing PMI came in above expectations, improving risk sentiment and boosting commodity currencies led by the Aussie.
China PMI Beats Forecast
China’s official NBS Manufacturing PMI rose to 50.8 in April from 50.3 in March, beating the consensus estimate of 50.4. The reading marks the second consecutive month above the 50 threshold that separates expansion from contraction.
AUD/USD rose 0.45% to 0.6532, its best level in two weeks. The Australian economy has significant exposure to China through commodity exports, particularly iron ore, coal, and liquefied natural gas.
RBA Policy Outlook
The Reserve Bank of Australia (RBA) is expected to keep interest rates on hold at its upcoming meeting, having already delivered significant tightening. Governor Michele Bullock has emphasised that the RBA remains vigilant on inflation but is mindful of the impact on households with variable-rate mortgages.
Iron ore prices also responded positively to the Chinese data, rising 1.8% to $108 per tonne. This provides additional support for the Australian dollar given Australia’s status as the world’s largest iron ore exporter.