The Australian and New Zealand dollars regained some ground on their US counterpart on Thursday following a better-than-expected reading of China's factory activity and they bounced off multi-month lows against the yen. The HSBC Flash China Manufacturing Purchasing Managers' Index (PMI) recovered to 49.7 in May, beating a Reuters' poll forecast of 48.1, which was also April's final reading. The Australian dollar is sensitive to news out of China, its key export market.
The firm reading sent the Aussie a third of a US cent higher to $0.9265 to show a small gain of 0.2 percent on the day. It was pulling away from a two-week low of $0.9208 on Wednesday in part due to falling for iron ore prices, Australia's single largest export earner, and a deterioration in local business sentiment. The Aussie bounced off a two-month low against a broadly weaker yen to last be at 94.04 yen though it was still down 1 percent for the week.
Again, government bond prices were the clear outperformers, having tracked a recent global rally. Bond futures swung to nine-month peaks, with the three-year bond contract reaching 97.270. It has gained as much as 15 ticks in the past 24 hours to last trade at 97.210. The 10-year contract rose to 96.375, its highest since early August with little resistance until 96.420. A break above would take it to a peak unseen since June last year, having touched a two-month low Tuesday. Across the Tasman sea, the New Zealand dollar jumped to $0.8582 on the back of the PMI figures, recovering from a slide to a four-week low of $0.8538 in offshore trade.
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