Forex - Australian dollar retains weakness despite HSBC China PMI gain

Investing.com - The Australian dollar remained weak on Monday despite the final reading of the HSBC China PMI for October matching the flash level and increasing on September.

AUD/USD traded at 0.8718, down 0.92%, while USD/JPY traded at 112.73, up 0.36%, with markets in Tokyo shut for a holiday. EUR/USD traded at 1.2468, down 0.46%.

The HSBC China Manufacturing Purchasing Managers' Index final reading for October came in at 50.4, in line with the flash reading, and higher than the 50.2 final in September.

China's official Manufacturing Purchasing Managers' Index dropped to 50.8 in October from 51.1 in September, according to the China Federation of Logistics and Purchasing, which issues the data with the National Bureau of Statistics. The index, released at the weekend, remained above the key 50 level, which separates expansion from contraction compared with the previous month, but was below expectations.

On Monday, the CFLP mon-manufacturing index clocked in at 53.8 in October, down from 54 in September.

Zhao Qinghe of the National Bureau of statistics said at the weekend that smaller companies were still facing difficulties amid the slower expansion and that "looking ahead there is a need for stepped up targeted measures."

Elsewhere, Australia's AiGroup manufacturing index for September rose 2.9 points to 49.4 and remained in contraction territory despite a recent weaker Australian dollar.

Australia's TD-MI inflation gauge rose 0.2% in October, putting the annual rate at 2.3%, below the midpoint of the RBA's 2% to 3% target band.

September building approvals in Australia fell 11%, while ANZ job ads for October rose 0.2% on month, the fifth staright monthly gain.

Last week, the dollar shot up against most major currencies on Friday after the Bank of Japan surprised markets by beefing up its stimulus program, while strong U.S. data also fueled demand for the currency.

The yen came under broad selling pressure after the BOJ said it would raise its monetary base target to an annual increase of ¥80 trillion from ¥60-70 trillion, a preemptive move to steer the economy away from deflationary decline while improving the chances of reaching inflation goals.

Adding to pressure, a Japanese government panel overseeing the Government Pension Investment Fund approved plans on Friday for the fund to raise its holding of foreign stocks to 25% of its portfolio from 12%.

Friday's changes to Japanese monetary policy caught many investors off guard and sent the dollar soaring over the yen and most other currencies as well.

Strong data out of the U.S. also bolstered the greenback.

The Thomson Reuters/University of Michigan final consumer sentiment index rose to a seven-year high of 86.9 this month from 86.4 in September. Analysts had expected the index to remain unchanged.

In addition, industry data showed that the Chicago purchasing managers' index rose to a three-and-a-half year high of 66.2 in October from 60.5 in September, confounding expectations for a reading of 60.0.

The US dollar index, which tracks the performance of the greenback versus a basket of six other major currencies, was up 0.41% at 87.39.

On Monday, the U.S. releases construction spending for September, seen up 0.7% on month, and the ISM data is due on manufacturing assessments.