The Australian and New Zealand Dollars are edging higher early Tuesday as investors continue to pressure the U.S. Dollar in reaction to the latest major decision from the U.S. Federal Reserve. Traders are also waiting to hear from the Reserve Bank of Australia (RBA) at 04:30 GMT. Prices were also influenced by domestic data and well as better-than-expected manufacturing numbers from China.
The U.S. Dollar continued to weaken on Tuesday against major currencies as the Federal Reserve’s new policy framework continued to fuel bets that U.S. rates will stay lower for longer than other countries.
The Fed’s historic switch last week to focusing more on average inflation and higher employment means it has leeway to keep benchmark rates lower for longer, which has encouraged dollar bears to sell the currency.
A decline in long-term Treasury yields on Monday highlights the strong headwinds facing the U.S. Dollar.
Aussie Traders Look Toward RBA Decisions
The Australian Dollar is holding around a two-year high against the greenback as traders wait for news from a Reserve Bank of Australia (RBA) policy meeting later on Tuesday to gauge policymakers’ views on the economy.
The RBA is not expected to make any major changes at a policy meeting on Tuesday, but traders want to see how central bankers assess the economic outlook as the country grapples with a recent increase in coronavirus cases.
Private Survey Shows China’s Manufacturing Sector Expanded in August
Results of a private survey on Tuesday showed China’s manufacturing activity expanded in August at the fastest pace in nearly a decade.
The Caixin/Markit manufacturing Purchasing Managers’ Index (PMI) came in at 53.1 for August, compared to 52.8 in July. Economists polled by Reuters had expected Caixin/Markit manufacturing PMI to come in at 52.7.
The expansion in August was the fastest since January 2011, Caixin and IHS Markit said in their joint report.
“Manufacturing demand and supply continued to recover, and overseas demand started to pick up,” wrote Wang Zhe, a senior economist at Caixin Insight Group.
In August, “the subindices for output and total new orders again hit their highest levels since January 2011,” the report said. The gauge for new export orders also entered expansionary territory for the first time this year, as the coronavirus outbreak slowed overseas, added Wang.
On Monday, China’s National Bureau of Statistics reported that official manufacturing PMI for the month of August came in at 51.0, slightly missing analysts’ expectations for a 51.2 reading.
For a look at all of today’s economic events, check out our economic calendar.
This article was originally posted on FX Empire
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