Australian Dollar Declines As China Factory Activity Shrinks To Near 3-yr Low

The Australian dollar fell against its major counterparts in the Asian session on Friday, after a data showed contraction in China manufacturing activity in January, suggesting that the world's second largest economy has lost its momentum at the beginning of the year.

Survey data from IHS Markit showed that the headline seasonally adjusted Caixin Factory Purchasing Managers' Index, or PMI, fell to 48.3 from 49.7 in December. The reading was the lowest since February 2016.

Any reading below 50 indicates contraction in the sector.

The subindex for new orders dipped further into contractionary territory, pointing to a moderate contraction in demand across the manufacturing sector, the survey said.

Investors are also cautious as they look ahead to the U.S. jobs data for January due later in the day.

The latest survey from the Australian Industry Group showed that the manufacturing sector in Australia moved to expansion in January, with a Performance of Manufacturing Index score of 52.5. That's up from the stagnation point of 50.0 in December; a reading above indicates expansion and below means contraction.

The Australian Bureau of Statistics said that final demand producer prices were up 0.5 percent on quarter in the fourth quarter of 2018, down from 0.8 percent in the three months prior. On a yearly basis, final demand producer prices advanced 2.0 percent, slowing from 2.1 percent in the third quarter.

The aussie fell to 2-day lows of 1.0471 against the kiwi and 0.7237 against the greenback, from its early highs of 1.0519 and 0.7278, respectively. If the aussie falls further, 1.02 and 0.71 are possibly seen as its next support levels against the kiwi and the greenback, respectively.

Reversing from its early highs of 79.31 against the yen and 0.9554 against the loonie, the aussie fell to 2-day lows of 78.73 and 0.9514, respectively. The aussie is seen finding support around 77.00 against the yen and 0.94 against the loonie.

Having advanced to 1.5728 against the euro at 5:00 pm ET, the aussie reversed direction and fell to 1.5809. The aussie is poised to challenge support around the 1.60 level.

Looking ahead, at 2:30 am ET, Swiss retail sales for December are due.

PMI reports from major European economies and Eurozone consumer inflation data for January are due in the European session.

In the New York session, U.S. construction spending for December, nonfarm payrolls data, ISM manufacturing index and University of Michigan's final consumer sentiment index for January are scheduled for release.