Investing.com - The Australian dollar fell in early Asia on Monday despite an upbeat manufacturing survey as the outlook for inflation appeared subdued and investors looked ahead to a manufacturing survey from China.
AUD/USD traded at 0.7300, down 0.11%, while USD/JPY changed hands at 124.06, up 0.18%. EUR/USD was quoted at 1.0975, down 0.09%.
In Australia, the AIG manufacturing survey leaped 6.2 points to 50.4 in July, posting the first expansion since May 2014.
"The lower dollar was an important positive factor in the July turnaround in manufacturing performance which saw another lift in exports. Healthy contributions from the food and beverages sector and industry segments linked to residential construction offset continued weakness in other areas including the important machinery and equipment sector," said AI Group Chief Executive Innes Willox.
As well, the MI inflation gauge rose 0.2% month-on-month in June, well within the central bank's 1% to 3% band.
"Cautious optimism from the RBA governor in recent weeks speaks to us that the RBA board is likely to leave the cash rate at 2% for quite some time," MI said.
Also ahead are manufacturing PMIs from Japan, seen at 51.4 in July, and China - with the Caixin/Markit China final for July seen at 48.3 in the flash estimate. The Australian economy is highly dependent on exports to China.
The U.S. dollar index, which measures the greenback’s strength against a trade-weighted basket of six major currencies, was quoted at 97.42, up 0.10%.
Last week, the dollar fell against the euro and the other major currencies on Friday after data pointing to sluggish U.S. wage growth tempered expectations for a rate hike in the coming months.
The Department of Labor reported that the U.S. employment-cost index, a measure of workers’ wages and benefits, rose just 0.2% in the second quarter. It was the smallest quarterly increase since records began in 1982 and was well below economists’ expectations of a 0.6% increase.
The unexpectedly weak data prompted investors to push back expectations on the timing of an initial hike in short term interest rates.
The dollar had strengthened earlier in the week after the Federal Reserve indicated that interest rates could rise in the coming months, possibly as early as September, and after data showing U.S. economic growth accelerated in the second quarter.
The U.S. economy expanded at an annual rate of 2.3% in the three months to June the Commerce Department said Thursday. First quarter growth was revised up to 0.6% from a previously reported contraction of 0.2%.
In the week ahead, investors will be turning their attention to the latest U.S. employment report, which could reinforce expectations for higher interest rates.
On Monday, the U.K. is to publish its manufacturing index.
Markets in Canada are to remain closed for a national holiday.
The U.S. is to release data on personal income and expenditure. The Institute of Supply Management is to release data on manufacturing activity.