Investing.com - The Australian dollar fell further in Asia on Monday as manufacturing in key export destination in China came into focus and Middle East tension between Saudi Arabia and Iran led to a snap in diplomatic ties.
The announcement to cut diplomatic ties was sent in an Arabic-language Twitter (N:TWTR) post by the Saudi Ministry of Foreign Affairs. "His excellency, Foreign Minister Adel al-Jubeir (of the) Saudi kingdom is announcing cutting diplomatic ties with Iran." The move followed a weekend storming of the Saudi embassy in Tehran in response to the kingdom's execution of a prominent Shiite cleric.
AUD/USD traded at 0.7222, down 0.93%%, while USD/JPY changed hands at 119.74, down 0.30%.
China's Caixin manufacturing index for December fell to 48.2, well below a forecast of 49 and less than the 48.6 previously. Japan said its manufacturing index for December came in at 52.6, up from 52.5.
In Australia, the AIG manufacturing index came in at 51.9, in expansion, but down from 52.5 previously.
In the week ahead, investors will be looking ahead to Friday’s U.S. jobs report for December, as well as reports on U.S. manufacturing and service sector activity. Tuesday’s euro zone inflation report will also be in focus.
On Monday, in the euro zone, Germany is to release preliminary data on consumer inflation.
The U.K. is to release survey data on manufacturing sector activity.
In the U.S., the Institute of Supply Management is to release data on manufacturing activity
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was down 0.05% to 98.75.
Last week, the dollar traded higher on the last day of the year on Thursday, at the end of a year which saw the greenback post gains of almost 9% against the other major currencies, boosted by the diverging monetary policy stance between the Federal Reserve and other world central banks.
A key factor in the dollar’s gains in 2015 was the belief that the start of a rate hike cycle by the Fed in conjunction with continuing loose monetary policy from the European Central Bank and the Bank of Japan would continue to underpin investor demand for the greenback.
Higher interest rates make the dollar more attractive to yield-seeking investors.
The Fed hiked U.S. interest rates for the first time in almost a decade last month and further rate increases are expected in 2016.
The euro fell to a one-week low of 1.0852 against the dollar on Thursday and the single currency ended the year down more than 10%, its second straight annual decline.
The dollar hit two-month lows against the yen, falling to 119.99. For the year the dollar edged up 0.4% against the yen, its fourth consecutive yearly gain against the Japanese currency.
The Australian dollar ended the year down 11% against the greenback, the third year of losses, while the New Zealand dollar lost 12%.