The Australian dollar dropped to a two-month low on Thursday after data showed China's manufacturing activity shrank in March for a fifth straight month, underscoring concerns about growth slowing in the world's second largest economy.
After HSBC flash PMI showed the overall rate of contraction deepening and new orders sinking to a four-month low, the Aussie fell 0.7 percent to $1.0383, though it later recovered somewhat above key support levels to last fetch $1.0414.
"Growth momentum could slow down further amid a combination of sluggish export new orders and softening domestic demand. This calls for further easing steps from the Beijing authorities," HSBC chief China economist Qu Hongbin said. While the slowdown boosts expectations for Beijing to loosen policy, inflation risks were also uncovered by the survey, highlighting the dilemma facing policymakers, who are determined to contain price pressures.
The data weakened the Aussie dollar as it added to concerns about China's demand for Australian commodity exports. China is Australia's key export partner with bilateral trade for the previous fiscal term adding up to 7.5 of Australian gross domestic product.
The Aussie has fallen nearly 4 percent this month amid broader dollar strength. On Thursday, it briefly breached major support at the 200-day moving average of 1.0402. More chart support was at the 100-day moving average of 1.0373 and the base of the Ichimoku cloud at 1.0354.
The Aussie also hit this year's low on the euro at 1.2738, declining for the fifth consecutive day. It was last up 0.2 percent at $1.3241, having fallen from the overnight high of $1.3286. It faced resistance at the 61.8 percent retracement of its February-March slide at 1.3300.
Against the yen, the euro stood at 110.34, down sharply from the previous day's high of 111.43. It too failed to clear an important chart resistance at the post-intervention October 31 high of 111.57. The yen briefly jumped to 83.14 against the dollar after data from Japan showed the country logged in a trade surplus of 32.9 billion yen in February against a forecast for a 120 billion yen deficit. It was last up 0.1 percent at 83.32.
The yen has fallen 8 percent versus the dollar in 2012, on the Bank of Japan's easing steps and after the country last year logged its first annual trade deficit in 31 years due to a surge in fuel imports following the Fukushima nuclear accident in 2012.