WELLINGTON/SYDNEY: The Australian and New Zealand dollars fell sharply on Wednesday as a shockingly weak reading on China's manufacturing activity dealt a body blow to risk sentiment, sending stocks and commodities reeling.
The Aussie dollar sank to a fresh six-week trough at $0.9756, extending losses for the week to over two cents.
The HSBC China PMI fell to a 38-month low of 48.0 in November, from 51.0 the month before, suggesting manufacturing had slowed markedly perhaps in reaction to weakening export orders from Europe.
The Aussie is very sensitive to Chinese economic indicators as the Asian giant is its single largest export market and a major determinant of commodity prices.
NZ dollar dropped to an eight-month trough of $0.7427, from $0.7476 in New York. Break of $0.7437 technical support was a bearish signal.
Trading thin due to a Japanese holiday and US Thanksgiving on Thursday. Dealers say some selling due to rumours the deal over Dexia could have hit a snag, but few details known.
Earlier, Australian data showed construction work done jumped 12.5 pct, far above forecasts of a 2.0 pct rise. The surge was driven by massive investment in the resource sector and should have given a big lift to GDP in Q3.
The Antipodeans under pressure against the yen, with the Aussie hitting a fresh six-week low of 75.25. Kiwi around 57.30 yen, after touching 57.27 on Tuesday, its lowest since March 18.
NZ markets reluctant to take action as the nation holds its general election on Saturday. Although the ruling National Party has a commanding lead in the polls, it is unclear whether it will have an outright majority or need minor party support.
NZ bond yields down about 1.5 bps across the curve as markets remain wary of euro zone crisis, which has sent local yields to record lows. Market bets for rate cuts also pulls down yields.
Aussie futures follow US Treasuries higher, with the three-year debt contract up 0.04 points at 96.890, just under a 3-year peak struck on Tuesday. The 10-year contract added 0.03 points to 96.055, having spiked to a fresh 3-year peak of 96.070 at one stage during the session.
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